Gold continues to trade in U.S dollar terms at 11-month lows as the dollar is currently at its strongest in a generation as currencies around the world have been rapidly devalued so far in 2021, which should dramatically hit the profitability of multinational companies.
However, when measured against many of these depreciated currencies, gold continues to serve its role of being a strong store of value.
In currencies such as the Euro, Japanese Yen and the Pound Sterling, gold is up nearly 10% in the past year.
With the dollar showcasing considerable strength so far in 2022, it is worth highlighting that global growth is slowing down as Chinese growth missed expectations in the second quarter. This coincides with the Atlanta Fed recently lowering Q2 GDP estimates to negative, which would mark two straight quarters of negative GDP in the United States.
Historically, gold has performed very well during recessions or specifically during stagflation.
In the last three recessions since 2000, its performance has countered that of the S&P 500, showcasing gold’s virtue of being a hedge against financial distress.
In addition to that, central banks around the world continue to accumulate gold. In May, central banks added a net 35t to global gold reserves, which was the second consecutive month of net buying.
This comes after the World Gold Council reported in its annual survey that central banks would continue to buy gold this year.
During the survey, many of the central banks expressed concern about a possible global financial crisis and anticipated changes in the international monetary system. Today we are beginning to see many countries, notably in the east, move away from the U.S dollar in trade.
Zacatecas Silver Corp (TSX-V: ZAC)
A company I am very excited about is Zacatecas Silver which is located in Mexico.
The company’s flagship asset is the advanced stage Esperanza Gold Deposit alongside the Zacatecas Silver Project. A world-class management team leads the company with a strong track record of execution and unlocking tremendous value for shareholders.
In late February, the company acquired the high-grade oxide gold Esperanza Project from Alamos Gold. The project has a historical measured and indicated resource of 1,083,366 ounces of gold and 8,936,201 ounces of silver.
Management has prioritized preparing an updated resource estimate this year and completing a current economic study on the project based on the updated resource estimate.
This is a near-surface oxide-gold-silver deposit which will most likely become an open pit mine, with the gold and silver recoveries being by the conventional heap leach.
The most impressive component of this deposit is the grade, as this project represents one of the highest-grade oxide gold development stage projects globally of this size, which signifies this will be a very high margin operation when it is put into production.
The project also has multiple high-priority gold exploration targets within concessions surrounding Esperanza, which could grow the deposit even further.
After the company completes the resource estimate and the current economic study on the project this year, shareholders will see a clear path to taking this excellent project into production.
In my next article on the company, I will be doing an editorial exploring both the company’s assets in-depth but today, I am very pleased to be joined by the company’s President and CEO, Bryan Slusarchuk, to provide the Gold Telegraph readers with an update on how things are going.
Thank you, Bryan, for once again providing an update on the exciting Zacatecas story.
How are things going? I noticed the company recently commenced work plans to prepare a current resource estimate at the advanced stage Esperanza Gold Project.
When does the company plan to publish this updated resource? Also, for new readers, can you touch quickly on the historical resource of this project?
Thanks Alex, I appreciate the opportunity to provide the update.
Things are moving forward very nicely on both projects. On the Zacatecas Silver Project, we have an ongoing drill program. Results to date on the project have been excellent and more assays are expected imminently.
At the advanced stage and high-grade Esperanza Gold Project, we have started work to prepare a current resource estimate as you mentioned. Work is occuring on the ground right now and a key component involves re-sampling and assaying drill core alongside metallurgical work. Remember, significant core and reverse circulation drilling occurred at this project, prior to the historical resource calculation (98 per cent of the historic resource was in the measured and indicated category), resulting in a total of 389 drill holes for 69,716 metres.
We are targeting to complete the resource calcuation in Q3, indicative of the fact things are progressing very quickly with the program.
The historic resource makes the project one of the highest grade development stage oxide gold projects in the world, having a resource in excess of 1 milllion ounces. The historic resource was a measured and indicated resource of 34,352,000 tonnes at 0.98 gram per tonne gold and 8.09 g/t silver for 1,083,366 ounces of gold and 8,936,201 ounces of silver and an inferred resource of 718,000 tonnes at 0.80 g/t gold and 15.04 g/t silver for 18,375 ounces of gold and 347,192 ounces of silver (historical measured and indicated resource of 1.22 million ounces gold equivalent at 1.11 g/t AuEq).
Does the company plan on publishing an updated economic study in the months ahead? Is the goal to make a construction decision in early 2023?
Yes, and rather than publish a Preliminary Economic Assessment, we plan to prepare a Pre-Feasability Study which obviously provides a higher confidence level. We inherited a lot of great information on the project from Alamos Gold, who as you know is the largest shareholder of Zacatecas, and that in combination with our work to date gives us enough comfort to go straight to the PFS level. As things are moving quickly on the ground, the PFS is a high priority milestone and we will update the market as to the anticipated timing shortly.
As to construction decision timing, this will be guided by a few different factors including of course the PFS, metals market condtions and the EIA process. While previous published but now historic studies contemplating approximately 105,000 ounces per annum of production at an all in sustaining cost of USD $750 per ounce, this project is obviously potentially very attractive but lets see what our current information shows us and where the process leads. We are doing this very methodically and there are many stakeholders involved. We are very excited but lets see the process unfold and as it does, we will update the market accordinately.
Shifting gears, the company recently reported multiple near surface intercepts in the untested area of Panuco North. Can you touch on how drilling at the silver project is going and when investors should expect more assays at this project?
We are awaiting multiple assays from follow up holes in the Panuco North discovery area and from the El Cristo exploration target that we hope to have in hand to announce in the next two weeks.
El Cristo is interpreted to be the extension of the very prolific Veta Grande Vein onto our property and this is the arguably one of the most famous and prolific silver veins in Mexico. Lets see if and how the grades look as the vein crosses onto our property.
Panuco North has produced some outstanding grades for us in drilling to date, including some grades several fold higher than the Panuco resource but again, lets see what happens in the weeks ahead as more assays come out.
Drilling to date has been going well but I’ve been in the business long enough as to not make too many predictions on these next holes ahead of assays.
Are there any other catalysts investors should be looking for in the months ahead from Zacatecas?
The key things for investors and speculators to keep their eyes on will be on drilling results from Panuco North, from El Cristo on the silver project and for the resource estimate on the Esperanza Gold Project .
If the extenstion of the Veta Grande Vein that runs onto our property shows propoensity for carrying grade, its a game changer. That is very exciting. At the same time Esperanza is very advanced stage and this will involve more of a situation where we hope step by step moves toward production gets recognized.
Finally, Bryan, what is your current take on the precious metals sector?
I’ve never been more bullish. Right now, gold has been kept rangebound due to a global flight to liquidity. But soon, I think precious metals will be the only game in town. Central bankers around the world and governments are boxed into a corner. Runaway inflation can only be stopped through rapidly rising rates combined with a halt of the crazy fiscal stimulus we have seen over the last few years but the economy is in too precarious of spot as to take these measures.
Gold is already proving, yet again, its role in terms of preservation of capital but I think we are going into a period of time where gold will not only act as a wealth preserver but indeed will provide huge outsized real and nominal returns to investors and specualtors. If this is the case, there is no better place to be than gold and silver equities due to their outperformance in positive environments for bullion itself.
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