Category: Gold

The explosion in retail demand for gold has made headlines, but retail investors aren’t the only ones steadily stockpiling the yellow metal.

Central banks around the world are stockpiling gold in a big way – and appear poised to do so even more.

According to a recent central bank survey conducted by the World Gold Council, gold remains a favorable reserve asset globally.

Central banks buy and hold gold for many of the same reasons that retail investors do.

They want to diversify their reserves and hold liquid assets that, ideally, retain purchasing power over time.

Amid recent geopolitical strife and an explosion of the U.S. money supply in response to Covid-19, countries are increasingly unsure about the Federal Reserve Note’s longer-term standing as global reserve currency in international commerce.

Four-fifths, or 80%, of central banks hold gold in their reserves, according to the 2021 Central Bank Gold Reserves Survey.

Seven out of 10 central banks that reported currently not holding gold listed “preference for better yielding or higher returning assets” as the reason why.

This doesn’t come as a surprise, as institutional money managers myopically chase nominal returns without consideration of whether their real, inflation-adjusted returns might actually be negative.

Gold bullion’s nominal yield of 0% represents good value when considering it provides security of principal (it cannot default), protection against counterparty risk, and real upside potential compared to debt instruments denominated in depreciating fiat currencies which carry a sharply negative yield in real terms.

The World Gold Council survey reports that 25% of respondents plan to increase their gold reserves, up from 21% last year.

Central banks, however, are even more optimistic about gold as a reserve asset, with 61% of respondents saying they expect global gold reserves to increase over the next 12 months.

In response to a question about what topics are relevant for a central bank’s reserve management decisions, negative real interest rates were rated as relevant by the highest number of respondents.

Historical position, performance during times of crisis, and long-term store of value/inflation hedge rank has the biggest reasons why central banks reported holding physical gold.

Protection against default risk is listed as another primary reason to protect a nation state’s assets with physical gold.

Given that many countries and U.S. states divert their surplus cash balances into debt paper investments, gold serves as an excellent non-correlated asset without the counterparty risk that exists in virtually all other financial holdings.

The war in Ukraine has prompted more interest in gold by central banks in stepping up their gold accumulation activities. Washington DC politicians sent a strong message when they weaponized the U.S. dollar and its SWIFT payment system to punish Russia.

Nations that could someday envision being at odds with America now know for sure that reliance on the greenback can be disastrous.

Some nations, such as the Czech Republic, have been net sellers of gold but plan to reverse course and start buying. The newly appointed Czech Republic Central Bank Governor has said he plans to increase the country’s reserves to 100 tons of gold.

China, Russia, and Turkey have made notable gold purchases in the last several years, as well.

Egypt, Argentina, India, and Ireland have recorded the largest increases in gold reserves in Q1 of 2022, stockpiling 44.06 tonnes, 36.90 tonnes, 6.97 tonnes, 6.31 tonnes, and 2.52 tonnes, respectively.

Central bank demand may be a major factor for gold hitting fresh all-time highs in the months ahead. As doubts over currencies increase and as the world becomes increasingly polarized, nations will seek to hedge their risks with the tried-and-true asset capable of doing so: gold.

      

Source: Streetwise Reports   06/15/2022

Some big names in the industry invested during this company’s recent financing, which will fund a new drill program. Drill targets are already defined and derisked, leading one expert to conclude this “could be very successful for the company.”

Astra Exploration Inc. (ASTR:TSX.V), with its recent, now closed, nonbrokered private placement, generated CA$2.4 million (CA$2.4M) and garnered some highly accomplished investors, a news release noted.

“The demand for this offering and the quality of investor attracted has been incredible, especially in these challenging markets,” Astra CEO Brian Miller said in the release. “Their collective vote of confidence sends a very positive message regarding Astra’s potential as an investment opportunity.”

“Pampa Panciencia is similar in many ways to Yamana’s El Peñón, one of the largest gold mines in the world.”

—Peter Marrone, founder and executive chairman of Yamana Gold Inc.

For the financing, Astra issued 12 million (12M) units at $0.20 apiece. Participants included Michael Gentile, an investor who owns significant positions in about 20 junior mining companies. He invested the most, subscribing for 5M units of Astra’s offering, and now owns 23.75% percent of the Canadian exploration company.

Why Investors Are Casting Their Votes for Astra Exploration

What Gentile likes about Astra and its Pampa Panciencia project in Chile, in particular, is its potential for multiple discoveries, scale, and improved grade at depth, he said in the release. Also favorable is its location in a jurisdiction with a rich mining history and excellent existing infrastructure, including nearby mills and producing assets.

“The company has done an excellent job with very little funds so far, building up their geological model that has led to consistent intersections of wide mineralized structures of 20–30 meters punctuated by higher-grade substructures as they moved deeper in the system,” Gentile added.

His approach to choosing mining companies in which to invest involves identifying, early on, assets with the attributes to potentially become mines, he said. He likes to invest as early and as cheaply as possible. He prefers to be one of a company’s Top 5 shareholders, long term, and contribute value via support on financings, acquisitions, or capital markets strategy.

“When I invest in a company like Astra, if my thesis is correct, I’m looking to make 10–40 times my money,” Gentile said. “I hope to realize that value in my portfolio over the long term through eventual acquisitions or mergers of the companies.”

New Venture Equities Fund Limited Partnership, a private, equity-style investment fund managed by Goodman & Co., subscribed for 2M units of Astra’s offering. With these and its previously acquired shares, the fund now owns a 14.5% interest in Astra.

Peter Marrone, founder and executive chairman of Yamana Gold Inc., subscribed for 1.65M units, earning him an 8.5% stake in Astra. Marrone, too, finds Astra’s exploration work to date and discovery of low sulphidation epithermal systems compelling and noted these types of systems tend to be immense.

“I am very impressed by how management has been able to define structure and grade with such a limited amount of exploration expenditure, and near to surface, which portends very well for the project as drilling now turns to deeper areas,” he said in the release. “This has impressive upside.”

He added that Pampa Panciencia is similar in many ways to Yamana’s El Peñón, one of the largest gold mines in the world.

Share Structure More Tightly Held After Financing

In addition to Gentile, Marrone, and New Venture Equities, Astra management and insiders subscribed to the offering, for a combined 1M units. Now, the management team owns 20.4% of Astra, compared to 26% before this financing.

“With a market cap of only $5M prefinancing and a tightly held share structure with management and the three strategic investors announced today owning about 67% of the company on a partially diluted basis, Astra is set up for success,” Gentile said.

The company will use the proceeds of the recent financing to fund its phase two drill program at Pampa Panciencia, slated to start later in the season. Astra has already defined and derisked drill targets for it, which, Gentile noted, “could be very successful for the company.”

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Disclosures

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Astra Exploration Inc. Click here for important disclosures about sponsor fees.  

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( Companies Mentioned: ASTR:TSX.V,
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