You might recall a piece I wrote earlier in the year on Australia’s untapped gold wealth:
‘Paying off Australia’s National Debt with Unmined Gold’
As outlined, Australia’s gold reserves sit at around 9,500 metric tons.
We did a back-of-the-napkin calculation estimating that those reserves would be enough to pay off our national debt of around $940 billion.
And that’s AFTER taking out extraction and processing costs.
I explained that Australia could ‘hypothetically’ pay off its national debt with this unmined gold.
I say hypothetical because corporations hold those reserves, not the taxpayer. Meaning you have to be a shareholder to access the bounty.
And that’s where I step in…
Using my geology skills and industry experience, I recommend stocks leveraged to higher commodity prices.
For example, in late 2022, I recommended a gold producer called Capricorn Metals [ASX: CMM] to my paid readership group.
We closed half of that position for a 110% gain last Wednesday.
So, why trim back on one of our winners?
In my mind, gold is reaching an important juncture.
Opportunities could be about to shift from established producers (like Capricorn) to the next generation of gold miners.
How so?
Well, the latest Resources and Energy Quarterly Report was released earlier this month.
This is a government report, so it’s not the most riveting piece of writing. But there are always some interesting nuggets to digest.
And one particular thing stood out for me…
Australian gold output is projected to rise to 377 tonnes (annually) by 2030.
Right now, Australia produces around 258 tonnes.
That means this conservative government agency anticipates a 46 per cent surge in Australia’s gold output in just five years.
In other words, a modern-day gold rush!
Australia: The Epicentre in the Global Rush for Gold
You probably know that Australia is already a major gold producer.
So, how big is it?
As you can see, the country sits in third place, behind China and Russia, in terms of its annual output:
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| Source: USGS |
Interestingly, though, with the expected ramp-up, Australia has the potential to take the top spot before the end of this decade.
That would be a remarkable achievement.
As I’ve detailed, Australia holds the world’s largest gold reserves. That means it has more capacity to grow its output versus Russia or China.
According to the latest quarterly report, the bulk of the growth in gold output is expected to come from near-mine projects.
That is, large operators expanding existing operations.
So, the big X-factor here is the less visible reserves, i.e. those that don’t hold existing infrastructure to extract and process ore.
It takes more capital to extract these reserves versus deposits within spitting distance from active mines.
However, if gold remains elevated, attention may turn to these more marginal projects. So, the real kicker here will be if gold prices continue to rise…
That’s where Australia’s massive production ramp-up could swell further—well above the 46 per cent growth forecast.
That’s nice… But how can you take advantage?
I suspect elevated gold prices could create a golden capex boom over the coming years. And it will be driven by sustained elevated gold prices.
Capital and infrastructure build-outs will ramp up dramatically as marginal projects suddenly turn profitable.
That means the gold sector will require MORE staff, equipment, and machines.
And that brings us to the ‘picks and shovels’ investment strategy.
Traditionally, the biggest winners of a gold boom are the companies supplying equipment rather than the miners themselves.
That’s why finding service stocks tailored for the gold sector could be an excellent strategy as Australia ramps up its gold production over the next five years.
If you’d like to learn more, you can download my free presentation here.
This is where I outline the stocks directly leveraged to this opportunity and how you can get your share in Australia’s golden capex boom.
Until next time.
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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