Not all oz of gold are the same. Here is an example of a forgotten type of gold increasing in value quicker than physical gold is.
The gold market for physical gold is getting warmer every day. I don’t mean gold coins or gold measured in grams. I am talking about Gold measured in oz. per ton.
There are more ways to be exposed to gold besides buying the shiny metal in its finished refined state. There is also a way to own physical gold reserves in the ground. I call it Natural Gold. It’s still trapped in the rock. There is no reason the gold you own, has to be refined and shiny.
It is also not as expensive as you might think it is. In my case, I am an investor in a private equity project where a group of investors purchased a historic gold mine project. The mine was last commercially produced in the 1930’s. The mine starting out as a patented claim in the middle of a national forest, but has since generated more profits as a timber farm by being selectively logged every few decades.
Today, the property is growing a nice cedar forest in the Pacific North West. The property produced gold on and off for 40 years at the turn of the last century. The old historic tailings still have a trace of gold in it, per ton.
Our property is for sale, and has started to generate a real interest in it. Historically, the resources associated with the mine, while not large enough to capture any commercial interest, is large enough to generate interest from small operators who are looking for a source of rock to process.
Our mine has about 13,000 oz of estimated gold resources associated with it. It has never been drilled, so these resources are based on a quartz blow out at surface which could be loaded up and hauled out by dump trucks to an off-site milling facility.
We purchased the mine, as a long term investment so that we would have an asset to be sold during an economic blow off crisis that drives up gold above the long term average price. You have to have inventory in order to make a profit when others want what you have. This is our inventory.
It has been publically for sale now since Gold was around 1,000 per oz. We have marked up our total investment by over 300% and would gladly take a cash offer for the property. In the first 12 months the property was for sale, we didn’t hear from anyone who was serious.
That changed a few weeks ago, when we started to get real interest from real miners. In one case, a geologist with a history of gold mining in the area made an offer for the property. In another case, a professional hard rock miner is pondering an offer to operate the property. We have an exploration permit that is already in effect.
Now, this weekend, we have a new 3rd group of investors touring the property. These people already bought and built a “free gold” milling facility, but have not lined up a source of rock ready to be processed. Our location “may” fill that bill perfectly.
I share all of this, as an example of how not all physical gold, has to be in a mobile condition. We own hard physical gold still embedded in the quartz that has held it for millions of years. This gold is sitting at the surface of our property. The Gold trapped in the rock will have doubled its physical quoted value ($700 per oz or so at purchase, $1,400 current gold quote) while we are looking at booking a multi hundred % change in value for that raw gold.
One of the real benefits of our cedar forest & historic mine, is that it has year around water and provides a great place to take the family camping. It’s paid off and sits in a national forest. Because the property is a forest right now, it has an extremely cheap holding cost. Finally, the mine property provides us with a leveraged bet on Gold, Timber and we have a supply of 5 acre building lots in a national forest.
So while the property is for sale, we are in no rush to sell. We may even pull the property from the market, and relist it at a higher price, if we get a chance to have the quartz blow out drilled and a new resource estimate is generated. That is the ironic thing about this type of investment. The resell value can increase, even if our hard costs have already been fixed.
Not all oz. are the same, some of them are still frozen in time, but that doesn’t mean their resell value is frozen. Far from it.
Disclosure: Jack Barnes owns a slice of a historic gold mine, and is looking for a buyer. I am long physical metals, private equity in historic reserves, but does not have exposure to paper metals at this time.