Red Rock Resources’ (LON:RRR) joint venture in Victoria could be on track to discover Fosterville-scale gold, as its exploration of Australia’s hottest goldfields continues.
The discovery of Fosterville, the world’s highest grade and lowest cost gold mine, triggered huge interest in Victoria, which lies in southeast Australia. And now, Red Rock and Power Metal Resources (LSE:POW) have teamed up to focus on exploring the area further with their gold joint venture (“JV”) Red Rock Australasia. Red Rock has a 51.1% stake in the JV, and Power Metal the remainder.
Red Rock Australasia has applied for 30 licences in Victoria in total, covering around 2,300 square kilometres (“sq km”). In an interview with ValueTheMarkets, chief executive Andrew Bell noted that the JV’s entry into the area was timed perfectly, being followed by “a rush for all available land” by explorers and high-profile producers alike.
Asked if the Red Rock Australasia JV has the same potential as Fosterville, Bell noted the region’s considerable geological potential.
He also highlighted that the JV has targets “just waiting to be explored”, with two in particular that clearly “could be big”.
The chief executive also pointed to Fosterville’s extraordinary recent results, and its hunger to “find another Fosterville”:
“There must be other Fostervilles out there, or other rich deposits. And with the footprint we have in really good ground, we have as good a chance of finding them,” Bell said.
Bell said the JV’s wisdom lies in using old gold mines to find new ones, pointing out that it has “a lot of old workings” alongside targets based purely on geology and geophysics.
Past and future
Red Rock and Power Metals have major plans for Red Rock Australasia. Of the total licences applied for, the JV has been granted five – covering 279 sq km – while several of its other eleven licences are in the last processing stage.
Eventually, the JV partners plan to list core Red Rock Australasia assets through a Canadian public listing. This process is now well underway in parallel with other project work.
There is a strong mining history in Victoria, with a discovery in Ballarat in 1851 triggering a gold rush with around 6,000 diggers arriving every week. During the 1850s, an incredible one-third of global production came from the region.
Indeed, despite being Australia’s smallest state, Victoria has produced in excess of 2,400 tons of gold – an incredible 32% of all gold mined in the country – to date.
Production ceased in the 1920s for mines at the two centres, Bendigo and Ballarat ahead of a sixty-year hiatus.
But that all changed in 2005 when commercial mining started at Fosterville, located east of Bendigo, with a million ounces mined by 2016.
What next for gold?
Adding to Red Rock’s interest in Victoria is the gold price itself, which has been “very strong”.
Bell attributed this to extreme quantitative easing (“QE”) measures, which were introduced in the wake of the 2008 financial crash as a way to expand the monetary base while maintaining a low interest rate.
The chief executive commented on how difficult it has been for the US to stop issuing new credit through QE and begin reducing the central bank balance sheet in spite of its strength. Each time, Bell explained, markets were spooked and the policy had to be reversed. With even the US unable to achieve this goal, Bell does not expect others like Japan or the EU to fare any better.
Bell added that the pandemic has taken this “to a new level”, making it “difficult to imagine that there will not be inflation in the next two or three years”.
While the impact of inflation on the gold price in early stages might be ambiguous, Bell stressed that gold will ultimately “be seen as a safe haven and an inflation hedge” for “any prolonged period”.
Adding to this has been a lack of new gold discoveries, with not enough investment to meet foreseeable demands. Bell pointed out that, as the world gets richer, demand will rise. As such, if gold is “to hold its own as a percentage of assets”, its production must increase.
Bell acknowledged that some countries have been increasing production – with China in particular hitting around 380 metric tonnes in 2020. But nothing so far, he said, “has been able to replace the old position of South Africa, which, in the 1970s, was still producing 900 tons a year.”
Much of this was obscured by gold sale programmes conducted by central banks. However, as Bell pointed out, “non-traditional countries” have been “building up gold as part of their reserves”.
The chief executive asserted that, marginally speaking, there is an inclination among private investors and central banks to increase gold holdings. At a time when the gold supply is now increasing, this will put upward pressure on the precious yellow metal.
For that reason, Bell asserted that gold was not high risk and represents “a great insurance policy”. Not only that, but he believed it was “more probable than not” that gold will “go considerably higher”.
Red Rock and Power Metal have identified Victoria as just the right place for their exploration efforts, with its rich history and thriving present. Not only that, but they also have excellent timing – picking gold just as the element is set to rise. This could well mean great things for the early investor.
Author: Anna Farley
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