Gold prices have surged (+8.57% EOD Wednesday) since January. However, one expert says that trend could continue. 

“Shrinking exploration budgets, a dearth of new high-quality deposits and the “fear trade” will provide continuing upside pressure as the year unfolds,” says Brent Cook, editor of Exploration Insights. “Some gold stocks may be overbought right now, but long-term fundamentals are better than ever.” 

Cook is little known to the general public, but widely-followed in the global mining community. The annual sector outlooks that he delivers at the Prospectors and Developers Association of Canada, the world’s largest mining conference which opens in Toronto this weekend, are among its most anticipated events. 

Cook, who, along with partner Joe Muzumdar, did on-the-ground research at more than 30 international mining properties last year alone, agreed to provide us with advanced insights into his thoughts. 

Tanking capital investments drive scarcity

Key to Cook’s thinking regarding ore demand is the fact that mining companies have cut capital investments so much, that as prices inch back up, companies won’t be able to meet supply. 

“Many discoveries never pan out,” says Cook. “Even those that do, often take nine and or ten years to put into production. And there are not that many around.” 

Cook cites several widely-publicized opportunities, which are hampered by “fatal flaws,” which make them highly uneconomical or impractical to put into operation, due to factors ranging from their isolation, environmental opposition, or technical feasibility. 

These include Northern Dynasty’s Pebble Deposit and Nova Gold’s Dolin deposit, both of which are in Alaska; Barrick Gold’s Pasqua Lama deposit on the Chilean-Argentinian border and Romania’s Rosia Montana deposit. 

Three charts tell the story