The ABCs of Gold Investing & A Bird’s Eye View on Golden State Mining (ASX:GSM) - Kalkine Media

Summary

• The pandemic-induced volatility has increased the demand for gold-related stocks as investors rush for the yellow metal which is considered as a safe haven. 
• Several key aspects should be considered before selecting a gold stock. 
• Golden State Mining (ASX:GSM) has exhibited a strong exploration momentum at the Yule Project while undertaking several activities at its other projects. 

From conventional investment in physical gold, the popularity of gold stocks has come a long way, boosted by its critical role as a diversifier. At the same time, it hedges the portfolio against inflation and currency risk.

Its intrinsic characteristic, rareness of occurrence and diversified applications often seem to instil a halo-effect in the investors’ mind about the yellow metal. Meanwhile, due to its imperfect correlation with the stock market, gold-backed securities have emerged to be known as the so-called safe haven for investors. 

ALSO READ: Gold Prices Tepid, what is ailing the precious metal bulls?

Against the backdrop of the COVID-19 pandemic, gold investment vehicles have been capturing the headlines as an increasing number of investors are scanning for exchange-traded gold securities. However, the identification of a good gold mining/exploration stock demands a fair amount of effort to cherry-pick the companies with a good track record.

Let us explore the critical and decisive factors that investors need to consider before deciding to inject their hard-earned bucks into gold miners and associated companies.  

Factors for Consideration Before Investment in Gold Stocks

The evaluation of gold sector players could be done on various aspects before advancing with the investment decision such as:  

Management Efficacy

Management with a strong track record and vested interest in the Company’s advancement is critical to gauge the ability to achieve both short-term and long-term goals. Besides, they also ensure cost-effectiveness, resource management and improving the potential of the Company. 

Financial Position

Financial soundness and ability to obtain necessary financing is significant to identify the smooth flow of operations without any budget constraints.  

Location and Infrastructure

The project location and nearby structures can be a deciding factor for access to resources, workforce, transportation, and other facilities that are needed by the team to put the pedal to the medal on project evaluation and delivery. Meanwhile, the political vulnerability associated with mining makes it significant for the project to be located in excellent jurisdictions, with the government and community supporting the activities. 

Resource Grade and Reserves

Gold is a scarce commodity, and thus analysing the reserves is critical before selecting the company involved in gold exploration. Large and high-grade gold typically indicates potential success for the Company. 

Operational Effectiveness

Unwarranted challenges such as political, economic, health or worker-related issues can impede the progress of exploration activities at a gold exploration/mining project. The investor, using the past record and current risk-management practices should, therefore analyse the company’s ability to address such concerns.  

Selecting a valuable nugget demands a strategic approach towards considering various aspects which can affect the future of the Company, thereby impacting its share price.

Golden State Mining (ASX:GSM) in the Spotlight

Headquartered in Western Australia’s capital city Perth, Golden State Mining was formed with the goal of acquiring quality exploration assets. In order to build in-ground resources, its technical team is managing several aggressive exploration programs.

ALSO READ: A 360-Degree View on Gold: Golden State Mining (ASX:GSM) Riding High on Yule Gold Project

Strong Management Foothold

The exploration activities of Golden State Mining are guided by its management team which has diverse experience across various commodities and regions. Significantly, the broad corporate expertise of the leaders ranges from exploration to capital markets and founding as well as management of several significant organisations in the mining and resources sector. 

Financial Prowess

The Company raised $2.2 million in a placement initiated in May 2020. It enabled the Company to execute both short- and long-term strategy concerning its flagship Yule Project. The Company had cash and cash equivalents of $2,758,000 at the September quarter-end. 

Location and Infrastructure

The Yule Project is situated in Western Australia’s northern Pilbara region. Four granted licences and two exploration licence applications cover a total of 708 square kilometres in Pilbara. 

The Murchison Project consists of three separate tenement holdings, with Cuddingwarra, Big Bell South and Cue covering ~164.5 square kilometres project area with multiple high priority targets requiring additional exploration.

The Four Mile Well Project encompassing 38 block exploration licence measuring 107.6 square kilometres, is stationed 9km to the north of the Laverton townsite in the Eastern Goldfields.

ALSO READ: Golden State Mining (ASX:GSM) ends September Quarter on a high with solid Exploration Results

Resource Grade and Reserves

The Yule Project sits at a significant geological terrain frontier and is near or hosts major regional structures including the Yule River Shear, Sholl Shear Zone and Mallina Shear. The Company completed its maiden Yule South Aircore program over five gold target areas in August 2020. Significantly, broad zones of hydrothermal alteration as well as quartz veining were noted, with multiple over 100ppb gold intersections. The second phase Aircore program cover six target areas over Yule North and South with results expected through the month of December.

Operational Excellence

Golden State has successfully advanced its exploration endeavours despite the several operational challenges presented by the COVID-19 pandemic. With all its tenements located in Western Australia, the pandemic had little impact on their accessibility.

Phase 1 drilling has further advanced the understanding at Yule South, with new knowledge to be applied to follow up on drill planning and new drill target research in the greater Yule project area.

The purchase of an aeromagnetic dataset previously held by Core Geophysics Pty Ltd for the Yule Project is delivering significantly higher resolution, facilitating the interpretation of additional structurally hosted gold targets with the spotlight on intrusive environments.

ALSO READ: Golden State Mining (ASX:GSM) in high spirits after wrapping up Yule Phase 2 AC Program

On 2 December 2020, GSM traded at $0.230.