What the gold rally means for Canada

Every September, CMJ publishes an issue focused on gold, but it’s been a while since the picture for the yellow metal has been so bullish.

This August, we saw a new all-time high in gold at US$2,089.20 per oz. According to various forecasts, this could be just the beginning of an extended rally. In April, Bank of America raised its 18-month target for gold to US$3,000 per oz. And a month later, European investment and asset management firm Incrementum published its annual In Gold We Trust report, predicting US$4,800 per oz. gold – or potentially much higher – by the end of the decade.

In the current environment, where uncertainty around the pandemic and its effects on global health and the global economy reign, such predictions are sounding less far-fetched than they would have even during gold’s last bull run, which saw a peak of US$1,921 per oz. in 2011.

Heck, even gold-phobic investors like Warren Buffett are coming around. The famous value investor created a market stir in August when he bought shares in Barrick Gold.

Canadian gold producers and juniors are already benefitting from renewed interest in the sector.

In Canadian dollars, August’s record high translates to nearly $2,745 per oz., positioning gold mines in Canada to generate some serious cash flow – even with the extra costs incurred related to the COVID-19 pandemic. For a rundown of Canada’s 10 largest gold mines, and pre-pandemic production figures and production costs, see page 19.

Notably, only one mine on our list is owned by a single-asset producer, with many of the others having changed hands through recent M&A. Look for M&A to intensify as miners look to replace reserves and grow production.

The No. 1 mine on the list, Canadian Malartic, was built by junior miner Osisko Mining, which, in just over six years, took the project from its first drill hole to its first gold pour. It’s no surprise that the company (which reformed after a 2014 takeover of the original Osisko Mining) is looking to repeat the performance at its Windfall Lake gold project in Quebec.

The company is working towards a feasibility study next summer for Windfall, which is looking more and more like a company-maker. With every resource update Osisko has posted so far, the grade of the already high-grade deposit has actually improved – a rarity in gold exploration (see page 14).

Lastly, it should be said that, in addition to the gold price’s spectacular highs in Canadian dollars, another Canadian advantage in the current environment is the relatively low case count of COVID-19 infections across the country – at least so far. The success in controlling the spread of the virus has allowed for far fewer and less severe interruptions to operations, very few cases and fatalities, and has helped mines operate while keeping employees and remote communities safe (see page 25).