Now is the time to be building a growth company in the gold market - Revival Gold
(Kitco News) - The dearth of investment capital flowing into the junior exploration space is taking its toll on sentiment among industry executives, but one mining CEO said that this could the bottom signal everyone is waiting for.
Hugh Agro, president and CEO of Revival Gold
Hugh Agro, president and CEO of Revival Gold, said in a recent interview with Kitco News that for him, negative sentiment among industry officials is as high as it was back in the late 1990s.
"I have seen a number of CEOs throw in the towel," he said. "This environment is shaking out all the weak players, but I think the industry will be stronger in the long-term."
However, he added that industry players and investors have to remember that mining is a cyclical industry and he thinks it is only a matter of time before interest and capital returns to the sector.
The junior mining sector is already starting to see the slow return of fresh investment as gold prices trade near a one-year high. The Vaneck Vectors Junior Gold Miners ETF (NYSE: GDXJ) has pushed to its highest level since early-April, last trading at $31.90 a share, up more than 1% on the day.
However, looking past the price of gold, Agro said that the most significant factor that will drive renewed interest back to junior miners is the growing supply gap among the larger producers.
"You have to keep your eye on the long-term landscape," he said. "The fact is that no new growth projects are being developed within the gold industry."
Because of the current market environment, Agro added that the junior mining sector offers the best value for investors.
"A focused management team can generate real value from their assets in a way that a large producer with their systems, processes and G&A burdens can't," he said. "There is a lot of value hidden in some of these projects and it's up to the management teams to find that value and not just concede in a tough market environment."
Because industry sentiment is so low, Agro said that he expects to see more merger and acquisition activity. He added that Revival is keeping its eyes open for potential growth opportunities.
"Now is the time to be building a growth company in the gold market," he said, "not when everyone is overpaying for assets. Part of Revival's strategy at this point in time is to keep its eyes open for other opportunities to complement our portfolio. We do think there are a lot of good opportunities out there."
Revival gold has just started its summer exploration program at its Beartrack property in Idaho. The work program will include 5,000 meters of core drilling. Agro noted that the company has identified about 2 million ounces of gold ounces within the property. He added that their goal is to get that to 3 million ounces with their current program.