Gold prices have shot to nearly $1,900 per ounce in the past week, a nine year high and the seventh consecutive week of growth for bullion. But in this Covid gold rush investors could be shedding their environmental credentials.
“There’s all of a sudden more financing for gold exploration companies and that’s really happened over the past six months,” says Bryan Slusarchuk president and CEO of Fosterville South Exploration, one of the world’s highest grade gold mines.
Not for 10 years (or since the post-2008 gold rush) has Slusarchuk seen this kind of money flow into gold mining firms. It is the same story across the board.
The FTSE Gold Mines Index and NYSE Arca Gold Miners Index are both up by a third so far this year. Precious metal miners analysed by Bloomberg raised $2.4 billion in secondary equity offerings during the second quarter of this year, the biggest quarterly trading since 2013.
Miners can thank a rocketing gold price. Already at nine year highs, analysts at Citi and Goldman Sachs say it could surpass $2,000 before the end of the year. Miners also have something over bullion traders: Their shareholders can benefit from both yield and commodity price increases.
On the ground in Victoria, Australia, the rush is palpable: “There are more than 60 companies currently trying to acquire ground in the area,” says Slusarchuk. It is the same story in gold rich Argentina and Papua New Guinea too, he says.
The True Price Of Gold
A rising gold price can be good for two types of miners: The legitimate and the less so. Illegal or “wildcat” mining has historically thrived when bullion prices are high and 2020’s rush is no exception.
“With the economic recession driving more investment in gold globally, the ongoing disaster of wildcat mining in the Amazon could get much worse,” says Daniela Montalto, senior forests campaigner for Greenpeace U.K. The environmental organisation estimates that 72% of all mining conducted in the Amazon from January to April this year was illegal and took place on indigenous lands.
There are now 20,000 illegal gold miners on Yanomami territory, the tribe says. It has recently launched a campaign to expel the miners from their land, claiming they not only cause environmental destruction, but spread Covid-19 as well.
At least five Yanomami have died from Covid-19 spread by these miners, but 40% of the whole tribe could be at risk says a study by the Socio-Environmental Institute (ISA). A lack of healthcare in the area makes them acutely exposed.