In 2009, the price of gold has gone up over 30%, from $850 an ounce to just over $1,100. It soared through $1,000 an ounce and broke through $1,200 at one point.
It is not merely trading and speculation that has caused gold to keep making new all-time highs during the past year. For thousands of years, gold has served as a currency, medium of exchange, and a store of value. It is a protector of wealth and a natural hedge against inflation. The short-term solution of printing money to save U.S. economy from another Great Depression came at the huge cost of a large budget deficit, putting downward pressure on the value of its dollar, and as a result, upward pressure on the price of gold. In addition, for the first time in two decades, many central banks actually bought more gold than they sold. India had just bought 200 tonnes from the International Monetary Fund at an average price of $1,045 an ounce. Small countries like Sri Lanka and Mauritius are also following suit. Buying frenzy as such would only push the price higher. Conveniently, for the U.S., who has 80% of its foreign currency in gold, an escalated gold price actually helps them to pay off their huge debt with their large gold reserve.
To capitalize on the continuously rising gold price, one of the best ways is to invest in gold mining companies. Instead of paying “retail” and buying gold for over US$1,100 an ounce, it would be much cheaper to buy “wholesale” for the gold in the ground. Granted, when investing in gold miners, there are mining risks involved, and the larger gold producers possess the established reserves and production capacity to mitigate this risk. However, their growth is fuelled primarily by acquisitions of other gold companies at a premium to their net asset values, so their growth potential is very limited. Moreover, most stock market participants favour their liquidity which almost guarantees that their stocks are overvalued, making them not so attractive investments.
For the savvy investor, the more attractive investments are the junior gold companies, who usually provide much cheaper valuation, unhedged gold exposure, and plenty of upside potential. With the right selection and proper diversification, these investing in these smaller gold ventures will surely prove to be a better strategy than in the gold seniors. One of our favoured selections is Plato Gold Corp.(PGC-TSX Venture), which provides Canadian investors domestic mining participation in Quebec and Ontario as well as international exposure in southern Argentina.
Promising Gold Mining Properties
Plato has three gold exploration projects, two of which are in Canada and one in Argentina.(Cover the Val d’Or project first as it is most advanced. Then cover the Timmins project.)The Timmins Gold Project, with area totalling 2,473 hectares, includes their founding properties of Silver Fox Project-Guibord, Harker, Holloway and Marriott, as well as a later acquird Harker-Garrison property. It is located in the Harker/Holloway gold camp in the Timmins-Kirkland Lake area located east of Timmins, Ontario. A 7-hole 2,623 metres drilling program has just been completed at the Silver Fox property, which includes an intersection of 265 grams per tonne (g/t) of gold over 0.5 metres at drill hole G09-01. The remaining holes also received assay results including 0.8 metre at 3.59 g/t, 1 metre at 3.42 g/t, 0.85 metre at 1.96 g/t and 0.67 metre at 5.31 g/t.
The Val d’Or Project is located in Northern Quebec. It includes seven properties (Nordeau Bateman, Vauquelin, Pershing Denain, Vauquelin Pershing, Vauquelin Horseshoe, Hop O’My Thumb and Once Upon a Time) over 5,430 hectares, and is easily accessible from paved highway 117. In early 2009, Plato announced a National Instrument 43-101 compliant mineral resource estimate (prepared by MRB & Associates) for the Nordeau West property, which includes indicated resources of 30,212 ounces of gold on an average grade of 4.17 g/t and inferred resources of 146,315 ounces on average grade of 4.09 g/t. More recently, Plato has completed an 11 hole exploration drilling program at the Nordeau East property. Moreover, the first two holes, NE09-01 and NE09-02, intersected 14.35 g/t gold over 5.5 meters and 8.01 g/t over 6.7 metres respectively. These are highly encouraging results.
The Company’s latest acquired Lolita Project is a joint venture with Dr. Paul Lhotka, who holds a 25% interest in it. Lolita is located in Santa Cruz in southern Argentina. The province has recently emerged as one of the most successful jurisdictions for mineral exploration in South America. In the past few years, it has attracted interest from exploration companies worldwide resulting in the construction of four new precious metal mines. Lolita has great acreage of 29,904 hectares, and is easily accessible being adjacent to a gravel provincial highway. In late 2007, favourable results were obtained in the Espalda – Colita – Panza zones by Dr. Lhotka, who recommends that Plato continue exploration in the Patagonian spring with special emphasis on the area between the Corazon and Panza corridors.
Experienced Management
In addition to their promising mining properties, Plato has a capable management team and board of directors. Anthony Cohen, the President, CEO, and Director, has plentiful management experience in multiple public companies, including oil and gas, merchandising and energy, and real estate. Cohen is supported by Chairman and Director Luis Navas, a globally recognized expert in the areas of Executive Compensation, Human Resource Strategy and Corporate Governance. Navas has served for over a decade as an advisor to the board of directors and top management of major corporations around the world, in North and South America, Europe, Asia and Africa, across a wide spectrum of industries. His background includes experience in Corporate Finance, Human Resource Consulting, and Vice President of Compensation. Furthermore, his entrepreneurial skills are shown in co-founding Canada’s first independent executive compensation advisory firm and developing it into the country’s largest.
Other members of the board include John Paterson and Robert Van Tassell. Paterson is a mining engineer who brings with him great mining expertise and a diversity of experience in both major and junior mining companies. As a mining consultant, he has overseen the development of heap leach gold mines in the Ivory Coast, Mexico, Guatemala and Honduras. Meanwhile,Van Tassell has previous experience as Vice President Exploration for Goldcorp, where he was very involved with the high grade discovery at Red Lake and he now serves as a Director on a number of junior mining companies listed on the Toronto Stock Exchange.
Conclusion
In all, surging gold prices are near their record high but evidences suggest the uptrend will likely continue. Investing in gold miners is a great way to capitalize on this opportunity and to protect against inflation, which is one of the major factors of rising gold prices in the first place. Plato has the promising properties and the experienced management, and being a relatively small player right now, might actually turn out to provide the highest return later.
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