I sold most of my gold stocks last week. I’m still long on Cardinal though. It now comprises the lion’s share of my remaining portfolio. I see significant upside from the current price, regardless of movements in gold spot or GDX. But I accept its also exposed to the risk of a significant price drop in the near term.
What makes me nervous is the increasing likelihood of imminent mine closures. Obviously Cardinal has no mine and won’t directly be affected. And thankfully COVID-19 infections don’t seem to be spiralling out of control in Ghana (144 cases). For these reasons, I think we’re less exposed to the risk of mine closures than many other ASX gold stocks.
But I believe it will take just one closure of an ASX listed gold mine for the market to abandon these stocks. And a mine could be closed on the basis of just one or two COVID-19 cases.I suspect this would initiate a rapid de-valuation of gold stocks share prices across the board. And I don’t think CDV would be spared.
Over the past week or so, there’s been a growing number of copper and uranium mines close around the world being placed on C&M. I was listening to Eric Sprott’s weekly podcast this morning. In his opinion, many gold and silver mines in the US will be closing shortly. Who knows how long these closures will last, or what the impact will be on the company's balance sheet?
Last week, a number of ASX gold producers released cautiously upbeat statements about COVID-19 preparedness. I think these announcements put the market on edge by bringing into stark reality the possibility of closures over coming weeks. I originally planned to wait until Q2 earnings reports before selling my stocks, but I decided waiting until then was too risky and so sold on Thursday’s little rally.
