Owning a gold mine, although potentially very profitable, may also be a source of ruin for many corporations. 95% of gold discoveries worldwide are not economically viable. It takes somewhere between 8 – 13 years to bring a gold mine from scratch into production, though this time frame can be halved in certain cases. Regardless of the amount of money that has had to be spent and the resources involved, many ventures have had to be scrapped at some stage due to unsolvable problems.
- Stage 1: Exploration
- Prospecting to discover and confirm mineral reserves
- Conduct geological survey/geochemical sampling to locate and delineate ore deposits
- Conduct core drilling to determine the ore grade and geologic characteristics
- Begin collection of environmental and community baseline information
- Stage 2: Development
- Design and receive approval for mine construction and operation
- Complete engineering design of the optimal mining method (open-pit or underground) and mineral recovery process
- Complete project feasibility study
- Obtain necessary construction and operating approvals
- Obtain land and water rights
- Stage 3: Construction
- Construct mining facilities in accordance with approvals, requirements and standards
- Establish a skilled construction team to execute the development plan
- Construct mine and processing facilities and associated infrastructure, such as roads, power and water lines, and employee facilities
- Stage 4: Mining
10-35 years is the average lifespan for a gold mine.
- Stage 5: Closure/Reclamation
Gold mining can be politically risky, for many reasons. Gold mines cannot be moved and are very capital intensive, making them very tempting targets for abuse by governments or organized labor. Even though some world regions are considered riskier than others due to different property-rights traditions and current geopolitical events, ultimately every gold mine on earth bears some level of political risk. While gold mines in Africa can be outright confiscated by malicious Marxist governments and rebel militias, those in the West can be shut down just as easily by liberal and pro-environmentalist politicians.
Though these unfortunate events are very rare, they are one of the key reasons why it is so vital for Virgin Gold to diversify its investments into different quality gold mines in different global regions.
There is no reason to regret the fact that Virgin Gold has yet to own a gold mine outright, even after a decade in this business. It is rather a testimonial of how prudent this corporation is in its decision making and toward fulfilling its responsibility to its shareholders.
There is a saying that, "a gold mine is just a hole in the ground surrounded by liars". Operating a gold mine incurs considerable costs and more often than not, gold mines with “probable reserves” turn out to be not as lucrative as portrayed. The acquisition of gold mines with “proven reserves” has reached a record high; reflecting the record price of bullion gold. If gold price were to drift into a correctional phase, such investment in a gold mine at a peak price would equate to a major loss for many years down the road. Many current profitable gold producers acquired and developed their mines when gold prices were at record lows many years ago.
In fact, Virgin Gold is involved in a few gold ventures in both South America and Africa through its onshore investment vehicles. Our subsidiaries also jointly own rights to perform exploration and development work in both continents. We are sure that at the appropriate time and with the right opportunity, Virgin Gold will have outright ownership in some of the better gold mines worldwide.