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How the pandemic is making governments 'pro mining'

Kitco News

Gold producers will have a lot of cash flowing in at $1,700 gold, which makes the seniors attractive investments, said newsletter writer Chen Lin.

Lin writes Chen Picks, which focuses on small cap companies in the the resource, biotechnology and oil and gas sectors.

Lin said with high gold prices, the large miners are doing well. Juniors are starting to benefit, too.

"We are finally seeing some life in this sector," said Lin. "I am very pleased to see the acquisition pace starting to pick up. A lot of major miners will face a production cliff in a few years, so they need to shore up their pipeline."

Lin notes recent mergers and acquisitions, such as SSR acquiring Alacer and the proposed Gold X-Guyana Goldfields-Gran Colombia tie up. These actions are building confidence in the sector, said Lin.

"I expect to see more takeovers and hopefully a bidding war. That will really set the juniors on fire."

Asked for some companies he likes in the space, he mentioned Mongolian miner Steppe Gold.

"They just started processing ore, which has very high grade ore on a heap leech. They have two grams per tonne, which is very high grade, so they will have a lot of cash flow coming in," said Lin.

While mining has been disrupted by COVID-19 through mine closures in Mexico, South Africa and parts of Canada, the pandemic may have the effect of making countries better disposed towards mining.

Lin notes that countries like Thailand and Philippines have seen their tourism industries decimated by COVID-19 restrictions. Governments are turning to other industries to keep their populations working.

"So governments are becoming more pro mining. It's not like they like mining, but they like the jobs created by mining."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.