Gold prices have risen 13% this year, their highest level since 2012, as global economies fight to stay afloat amid coronavirus shutdowns. Prices could go higher still with Bank of America Merrill Lynch predicting gold to reach $3,000 by the end of next year. The uptick in gold prices has already created significant gains for major gold producers like Barrick Gold (NYSE:GOLD) (TSE:ABX) and Newmont (NYSE:NMT) and provides an ideal environment for near-term gold miners like African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF) and Corvus Gold Inc. (TSE:KOR) (OTCQX:CORVF). If history is any indication, these near-term producers could see sizable gains leading up to production, much like mid-tier gold producer Roxgold Inc. (TSX:ROXG) (OTCQX:ROGFF) did prior to its first gold pour.
Monetary stimulus and economic turmoil are pushing investors to gold as a safe-haven to protect their portfolios from current market volatility. When gold prices get a boost, it creates a great opportunity for near-term gold producers to either be acquired by industry giants or to raise the capital needed to bring their projects to production. It also makes junior gold companies, such as AGG, a potentially attractive takeover target for industry giants. The right junior miners offer investors a unique opportunity if they get in at the right time. By investing in companies that are close to producing gold, investors open themselves up to gains from the standard market re-rating that is applied to gold companies when they make their first pour.
Near-Term Gold Miners Get Ready to Shine Amid Rising Gold Prices
Near-term gold producer African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF) expects to begin production in Q4 2021 at its fully-licensed and fully-permitted Kobada Gold Project in Mali, West Africa. Kobada has a large and growing resource that includes a Measured and Indicated resource of 1.2 million ounces AuEq at 1.1 g/t and an Inferred resource of 1.0 million ounces AuEq at 1.0 g/t. [NTD: Make sure this is based on the old Feas study]
The company has continued to expand the resource at Kobada through an extensive diamond drilling program. On April 30, 2020, African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF) announced a new discovery of an expansive gold shear zone in the previously untested Gosso target. This new zone is situated 4 km east of and parallel to the Kobada Main Shear zone.
“We are very happy to report the potential for additional gold resources in this new shear zone. All prior drilling has been focused on the main Kobada Shear zone of which we only have tested 4 km along a total delineated strike of 16km,” said Dr. Andreas Rompel, Vice President Exploration.
He added that the company intends to further test the Gosso target during the next phase of exploration drilling.
The recent findings are very encouraging, but the company has still only scratched the surface at Kodaba. Rompel said that African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF) has “drilled approximately 4 kilometres out of 30 kilometres of shear zones identified on our concessions, which would indicate significant upside for further exploration.”
According to the NI 43-101 Feasibility Study on Kobada, the project has a cash cost per ounce of US$557 and an all-in sustaining cost (AISC) of US$788 an ounce, making it a very attractive project at current gold prices.
If African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF) can bring the Kobada Gold project to production in Q4 2021 with an AISC of US$788 per ounce, it will be a lower-cost producer than gold giant Barrick Gold (NYSE:GOLD) (TSE:ABX), which is aiming for AISC of $920 – $970 per ounce this year.
Corvus Gold Inc. (TSE:KOR) (OTCQX:CORVF) is another gold miner that is nearing production, although its timeline is longer than African Gold Group. In November 2018, Corvus released the results of a Preliminary Economic Assessment (PEA) for its Mother Lode and North Bullfrog projects in Nevada, which suggest a cash cost of US$680 per ounce and an ASIC of US$694. However, the company has continued to expand the main zone at the Mother Lode and North Bullfrog projects and it will be a while until production begins.
Near-Term Gold Producers Could Maximize Investor Gains
In the past, there have been numerous examples of near-term gold producers seeing sizable increases in their share price in the lead up to their first pour. One example is Roxgold Inc. (TSX:ROXG) (OTCQX:ROGFF), a Canadian-based gold mining company with assets located in West Africa.
In the months leading up to its first gold pour at its Yaramoko mine in Burkina Faso in 2016, Roxgold shares increased from C$0.75 in January to highs of C$1.76 in just a couple of months. Although the company’s stock has since slipped recently, it is still sitting at C$1.20.
Of course, the support in Roxgold stock could be due to its promising gold project in the mining-friendly jurisdiction of Cote d’Ivoire. On April 15, Roxgold announced the results of a Preliminary Economic Assessment (PEA) for the project, which included Life of Mine (LOM) gold production of 841,000 ounces with average annual gold production of 103,000 ounces. A week later, the company announced additional high-grade results from infill and extension drilling at its Séguéla Gold Project in Côte d’Ivoire.
African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF) is about a year and a half away from production at its Kobada Gold Project, which is fully licensed and permitted until July 2045. If gold prices remain at their current levels, or if they reach $3,000 in the next 18 months like BOA suggests, AGG will be making its first pour at the perfect time.
To learn more about African Gold Group Inc. (TSX-V:AGG) (OTCQX:AGGFF), click here.
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