The Latest from McKinley Gold Mine — September 2024
A General Message from Eric
The recent surge in gold prices presents a promising outlook for investors, potentially yielding higher returns. Gold has reached a new all-time high in September, nearly touching $2,600 per ounce.
However, this uptick also poses challenges, as it inflates mining operation costs — particularly in retaining contractors at previously agreed-upon rates. This critical issue will be a focal point in our upcoming investor meeting, given its direct impact on our budget and the project’s launch timeline.
To tackle these challenges head-on, I’ll be attending the MINExpo International. This expo presents a prime opportunity to network with contract miners, explore new collaborative ventures, meet potential partners, and gain valuable insights into current market trends and contractor rates.
In preparation for our mining operations, we’ve tasked KCA with compositing metallurgical samples to determine the optimal processing method. These ongoing tests will guide our decision between three options: initiating with gravity separation followed by flotation, beginning with flotation, or employing a hybrid approach where gravity separation is used initially, with flotation applied to the residuals later. We’re inclined towards this last option, as it could potentially minimize costs while maximizing recovery efficiency. We eagerly await the test results to finalize our approach.
Progress in August
- Directed KCA to composite metallurgical samples for gravity and flotation tests. This will determine the best mining approach and combination. We are awaiting the results.
The options under consideration are: Option 1: Gravity, then flotation Option 2: Flotation, then gravity Option 3: Gravity, leaving residuals for later flotation (Most likely option as it minimizes mining costs)
2. Conducted equipment review for small-scale and full production, focusing on mine working dimensions for engineering mine design.
3. Evaluating housing options for the production stage. Obtaining cost estimates for installing a restroom and small office at the concentrate storage building.
4. Engaging with mine contractors to assess current rates for budgeting. The recent gold price surge has made it challenging to retain contractors at original costs. We’ll address this crucial issue in the next investor meeting, as it’s vital for initiating operations.
↓Gold Production Price Historical Data from World Gold Council
Plan in September
- Update budgets based on new milling and mine designs
- Evaluate and — review KCA metallurgical data and develop implementation plan
- Continue discussions with contract miners for better pricing
- Attending the MINExpo International in Las Vegas
Gold Market Insights — GOLD is still very strong
Gold Price Performance
Gold has shown remarkable strength in recent months, reaching new all-time highs. In August 2024, gold prices surged to a record $2,531.70 per ounce. The upward trend continued into September, with gold hitting $2,584 on September 16, 2024. This represents a significant increase from the beginning of the year, with gold prices rising by over 20% since January 2024.
Factors Driving Gold Prices
Several key factors have contributed to gold’s bullish performance:
Monetary Policy Shift:
The U.S. Federal Reserve’s pivot towards a more dovish stance has been a major driver. Markets are anticipating interest rate cuts, with a 55% probability of a 50-basis-point cut at the September 18th FOMC meeting. Lower interest rates typically support gold prices by reducing the opportunity cost of holding non-yielding assets.
Economic Uncertainty:
Recent economic data, such as the weaker-than-expected U.S. manufacturing activity in August, has raised concerns about economic resilience
. This uncertainty has bolstered gold’s appeal as a risk-free asset.
Geopolitical Tensions:
Ongoing conflicts in Ukraine and the Middle East have increased global uncertainty, driving investors towards gold as a hedge against geopolitical risks. And there is a U.S. election which affects the future US monetary policy.
Supply Constraints:
Rising extraction costs and challenges in gold mining have contributed to a supply-constrained environment. The average All-In Sustaining Cost (AISC) of gold mining increased by 10% year-over-year, reaching $1,439 per ounce in early 2024
Market Sentiment and Demand
Investor sentiment towards gold remains largely positive:
- Central Bank Buying:
Central banks have continued to be significant buyers of gold, supporting demand and prices.
- ETF Inflows:
After a brief period of outflows in early August, gold-backed ETFs have seen renewed interest, particularly in North America and Europe.
- Technology Demand:
Demand for gold in technology, especially in electronics, saw a robust increase of 11.4% year-over-year in Q2 2024. However, some segments of demand have shown weakness.
- Physical Investment:
Bar and coin demand softened slightly, declining by 4.6% year-over-year in Q2, although demand remained strong in China and India.
The gold market from August 2024 to mid-September has been characterized by record-high prices and overall bullish sentiment. Driven by anticipation of Fed rate cuts, economic uncertainties, and geopolitical tensions, gold has maintained its appeal as a safe-haven asset. While some segments of demand have softened due to high prices, strong central bank buying and renewed interest from investors have supported the market. As we move forward, the gold market remains sensitive to monetary policy decisions, economic data releases, and global geopolitical developments, with many analysts maintaining a positive outlook for the precious metal in the near term.
Side Story : Chinese Economic Challenge will affect Gold Pricing?
Despite China’s ongoing economic challenges, including a property crisis and high youth unemployment, the gold market remains surprisingly robust.
Recent analysis suggests that China’s economic slowdown may have a limited impact on global gold demand and prices. Chinese consumers continue to view gold as a safe-haven asset, driving strong domestic demand even as the economy faces headwinds. The People’s Bank of China has also been consistently adding to its gold reserves, further supporting the market. This sustained demand is rooted in gold’s cultural significance in China and its perceived role as a hedge against economic uncertainty. Both consumers and the central bank are using gold to diversify their assets in the face of current economic pressures. As the world’s largest gold consumer, China’s continued appetite for the precious metal is expected to provide support for global gold prices. This trend underscores gold’s enduring appeal as a store of value, even in times of economic turbulence. While challenges persist in China’s broader economy, the gold market appears well-positioned to weather the storm, highlighting the metal’s unique status in times of uncertainty.
