The floodgates are open.
This week it all hit at once. I try to focus on one idea at a time in Golden Opportunity, but today, I have to talk about three major news items that hit this week.
Briefly: If you haven’t heard, I’ve been busy responding to what I believe to be false reporting about one of my favorite miners. Typically, you wouldn’t hear about this company unless you were a paid member of Golden Portfolio 10X (GP10X), but I felt it necessary to tilt my hand on this story.
Aya Gold and Silver, one of Golden Portfolio 10X's 32 recommendation, was hit yesterday by a short-seller’s report. I’ve already put out a message about this last night and a video this morning, but I just want to reiterate again: I think this short-seller’s report is wildly incorrect.
If you missed this mornings Live interview with Aya Gold and Silver's CEO, you can check it out by clicking here.
For the record: from my perspective, Aya is a fantastic silver company with one of the world’s best silver projects. It’s having a small issue expanding mine throughput right now – an issue that basically every miner experiences when they’re in the process of expanding operations.
Mining is very difficult. Every miner runs into problems. That’s basically what mining is: solving the endless problem of getting metal out of the ground. As mines scale, so do the problems they face.
Aya will continue to face all kinds of problems as it expands operations. That’s what mining is! But I have no doubts about Aya’s leadership and their ability to manage these problems and to continue to find success.
Another major story: Freeport McMoran runs one of the world’s largest gold-copper mines, the Grasburg mine in Indonesia. Earlier this week following an accident that killed two miners (with several others missing) the company announced that production will be slowed enough to trigger a “force majeure" contract default.
Force Majeure is a contract provision that basically says something unforeseeable and unpreventable happened that restricts the ability to fulfill the contract.
In response, already elevated copper prices surged – but it also means a significant amount of gold supply will likely be constrained for the foreseeable future. That means less gold coming into the market from one of the world’s largest gold mines.
Modern mining practices mean these kinds of accidents are rare, but they’re very serious and they can severely impact mining production.
Especially for a major miner like Freeport, this kind of accident puts them under a magnifying glass, and they’ll be very reluctant to move forward with production until/unless they can do the diligence necessary to convince Indonesia and the world’s investors that it won’t happen again.
According to BMO Capital Markets, this constrained production will mean a 35% cut to next year’s production, and that Freeport may not return to pre-accident levels until 2027.
In still other news, this week Bloomberg reported that China is seeking to become a custodian of foreign central bank reserves – or a kind of Ft. Knox of the East.
For decades, and still to this day, many sovereign nations have their gold parked in US vaults. The People’s Bank of China now seeks to use the Shanghai Gold Exchange as a destination for other China-friendly countries to park their gold.
As I’ve been saying for months, we know that Central bBanks have been buying up record amounts of gold – but typically that means buying it and storing it in their own vaults – or keeping it in European or American vaults.
Following the freezing of Russian assets in 2022, China is positioning itself as a safe place to keep your gold, out of the control of Western banking intrusion.
China is officially the fifth largest gold holder in the world, and it has the largest domestic demand for gold. Right now, London bullion vaults hold a reported 5,000 tonnes of gold, but the UK Central Bank only holds 310 tonnes.
By centering itself as a potential safe place to hold your gold outside of America’s influence, there could be a huge influx of gold purchasing in the Shanghai market. At the same time, gold touched just over $3,800/oz for the first time this week…
Suffice to say, this was a busy week in the gold markets, and even in the middle of a bull market, it felt hectic.
This kind of news usually means we’re due for a breather, so I would not be surprised if we see a correction. But my long term view is that we’re just getting started…
Have a great weekend, TGIF.
Best,
Garrett Goggin, CFA
Chief Analyst & Founder, Golden Portfolio