Source: Ron Struthers for Streetwise Reports 04/29/2018
Sector expert Ron Struthers describes the opportunities open to a small explorer operating offshore in gold-rich Ghana, and reflects on the upswing in oil prices.
Yet another signal that inflation and gold will go higher is the breakout in the oil price. This is a weekly chart and there was resistance at $55 and $60 per barrel. After going through $55, the price broke easily above $60. A lot of analysts have now been commenting about the inverted head-and-shoulders pattern, with the breakout above this last week. I expect we are now heading to $80 per barrel.
I would normally be suggesting some Canadian oil stocks but Canada has problems. Chiefly the U.S. no longer needs Canadian oil as they produce enough for themselves and refineries are full. Delays continue for all three major proposed oil pipelines from Western Canada: Kinder Morgan’s Trans Mountain expansion, Enbridge’s Line 3 replacement and TransCanada’s Keystone XL. As a result Canada has a lot of oil with no place to go. Our light oil is now discounted over $7 per barrel compared to prices shown above.
Higher energy prices will feed into inflation numbers and gold will also go higher because the US dollar will have to go lower. President Trump guarantees it with his “America First” policy, which will force the dollar to weaken.
The administration’s “irreconcilable” goals of cutting trade imbalances while funding a large fiscal stimulus program pose the biggest challenge to the international monetary system since the breakdown of the Bretton Woods agreement in the 1970s, George Saravelos, global cohead of FX research at Deutsche Bank, wrote in a note. The only way to resolve these conflicting objectives is via a weaker dollar, he said.
That’s because the U.S. will probably struggle to attract sufficient foreign capital to fund its twin deficits, and that lack of appetite will likely translate to more currency weakness, he said.
Gold will break to the upside soon, and a new bull market in the miners will be born. However, the timing will not matter for this gold explorer.
This is one of the most unique—and could be the most profitable—gold stock I have ever found. In gold mining, the waste rock and leach dumps are a cost, and also a hazard that needs to be managed. Could you imagine the benefit if the waste rock could be sold and generate revenues instead of costs?
That is one advantage for Hansa Resources Ltd. (HRL: TSX-V). Another factor is their exploration license area could hold one of the largest gold deposits in the world.
This opportunity has attracted some of the top mining engineers around the world, with Watts, Griffis and McOuat, Canada’s longest-running independent geological and mining firm being retained, along with Royal IHC.
Royal IHC is a world leader when it comes to doing any work offshore and near-shore. There are piles of YouTube videos on IHC equipment, but this is a good corporate video showing what they do.
Offshore mining can be very successful. You might have heard of the TV show “Bering Sea Gold;” it dramatizes offshore mining by going into the remote, far North in a more severe climate. The same creators of the “Deadliest Catch” TV show and they only operate very small rigs. They do get gold from the ocean. A more realistic example is Debmarine, which is run by De Beers, the diamond leader. Debmarine accounts for more than half the total diamond production in Namibia, and 90% of the diamond deposits.
The waste rock that Hansa would produce is aggregate (sands/gravel), and offshore operations for this are well known in France, Belgium, Germany and Holland. In fact the UK gets 25% of its national gravel requirements from a fleet of 28 offshore aggregate dredgers.
On March 20, Hansa announced that it had entered into a Mineral Property Option Agreement with Poseidon Offshore Minerals Inc. Poseidon is a private company that Watts, Griffis and McOuat is behind in Toronto, Canada, with operations in Ghana, West Africa. Poseidon has applied for an offshore mineral reconnaissance license to explore for gold, diamonds, heavy minerals and aggregate in an area of 20,000 square kilometers on the continental shelf of Ghana. Poseidon granted to Hansa an exclusive option to acquire 60% of Poseidon’s direct and indirect interest in and to the license, which would represent a 54% interest in the license taking into account the interests of the government of Ghana. To earn the interest, Hansa will be required to fund work programs totaling US$4 million over the 36-month period following the effective date, of which US$100,000 has been paid.
The location of this license is what makes it so special. It is the only location in the world where three gold-bearing river systems enter the ocean in close proximity and on a shallow shelf.As a result, an enormous amount of alluvial gold has been transported into the offshore area. Ghana has been the #2 gold producer in Africa for the past several decades, and in recent years has been in the top 10 world producers. For many centuries, it was known as the “Gold Coast.” Government is mining-friendly and the industry is on the rise with government efforts to improve the business environment.
Ghana also has an acute shortage of aggregates because of Africa’s infrastructure boom, and to meet the growing demand for large infrastructure and urban housing programs along the heavily populated coastal areas of the country. This factor must not be overlooked. Sand and gravel from the offshore mining operations could greatly alleviate this shortage. Selling the sand and gravels could offset most or all of Hansa’s operational costs.
China is funding at least $18 billion in infrastructure development in exchange for commodity supply.
Under the agreement, funding will be made available through the Chinese Development Bank and will support the building of a 1,400-kilometer …read more