Gold prices fell more than 5% on Monday, hitting a five-year low after a report showed that China’s gold holdings were significantly lower-than-expected.
Up until 2013, the two major factors that drove gold prices to record high levels were the Federal Reserve’s monetary easing program and purchases from central banks. The Fed has already ended its bond purchases and is in the process of further tightening monetary policy.
Not surprisingly, the outlook for gold prices has been bearish as a major factor that boosted prices is now off the table.
One last hope for gold bulls was that the Chinese central bank will provide support to prices as it was speculated that it has boosted its gold holdings between 2009 and 2015.
China last released the data on its gold reserves in 2009. Six years later, the Chinese central bank once again provided data on its gold holdings. The data though came as a huge disappointment for gold bulls. China increased its gold holdings by only around 60%. In fact, China’s gold reserves as a percentage of total reserves were even lower than that in 2009.
Most analysts now think that gold prices will test $1000 an ounce level. This is certainly not good news for miners, who have over the last two years focused on bringing down costs to adjust to the new low price environment.
This morning, Vancouver-based miner, Brazil Resources Inc. (TSX-Venture: BRI) announced that it has entered into a definitive agreement with Kiska Metals to acquire a 100% interest in the Whistler gold-copper project, which is located in south-central Alaska.
As per the terms of the agreement, BRI will acquire the stake in exchange for 3.5 million of its shares, which is based on the closing price on July 20, valued at $1.61 million.
The Whistler gold-copper project is spread over an area of 170 sq. km. It consists of several gold-copper porphyry deposits, including the Whistler deposit. Kiska has already completed a NI 43-101 resource estimate for the Whistler deposit. The report indicated resource of 2.25 million gold-equivalent ounces and inferred resource of 3.35 million gold-equivalent ounces. BRI though is treating this as a historic estimate and plans to complete an updated NI 43-101 Technical Report by a qualified person following the closing of the acquisition.
The company believes that the acquisition represents a major milestone in its strategy to increase shareholder value through targeted acquisitions, given the low cost of 4.5% dilution and the large historic resource on offer.
