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Profiting from Europe’s New Gold Rush

By Jeff Clark, Casey Research

Europe owns a sizable chunk of the world’s natural resources. Over the past few decades, however, EU countries have mostly imported their resources. Outlandish? Maybe. But it was simply easier, cheaper, and most importantly it avoided most environmental conflicts. Getting through government regulation and facing off eco-friendly groups is a time-consuming and outrageously expensive business… a fool’s errand. When you can simply import and let other countries deal with all the hassle, it made a lot of sense. But things change.

When no one’s got a job, it truly focuses the political agenda.

Europe’s job market is a mess. Demonstrators are crying out for action, for opportunity, for jobs. And mines employ a lot of people. The trend is reversing because of Europe’s sluggish economy and the real benefits of the increase in local jobs and the leap in tax revenue that mining projects bring. Of course, local economies benefit. Hotels are full of transient engineers and specialists, grocery stores feed the workers, and bars serve liquor to quench their dusty throats.

Then, of course, the government got involved…

Brussels, 2011. Seeing the benefits of the jobs, income-tax revenues, and all-around political advantages, a “Raw Materials Strategy” was initiated in 2008, then revised and updated in 2010, and again in 2011. The aim was to encourage sustainable supplies of raw materials from within the EU. It calls for policies in support of domestic mining.

So far, so good…

In September 2011, the European Parliament adopted the “EU Raw Materials Strategy,” a generally pro-mining document, though it’s sometimes criticized by the industry for being “too bureaucratic.”

“It’s positive, of course, that the political climate in Europe is at least in theory becoming more supportive of mining”

So on the one hand, the government says, “Sure, go ahead,” and spends years (and no doubt millions of euros) coming up with a plan, while the other hand slaps down a bunch of rules that stifles initiative, adds massively to production costs, and once more makes mining companies think twice before they put down the millions it takes to get started.

Driller killers, indeed.

Yet the gold mining sector in Europe represents 16,000 direct and indirect jobs as of 2009, and that is surely growing. So for the gold, the tax, the jobs, and for more than a few political careers, mining is right up at the top of the political agenda. And despite the regulation stranglehold governments put on mining companies, they are still reopening abandoned mines and are exploring entirely new areas. For investors, that’s very positive, exciting news.

Europe’s New Gold Rush

In Casey Research’s BIG GOLD, we’ve been talking a lot lately about the three main zones of metallogenic significance for gold in Europe: the Iberian Pyrite Belt; the Carpathian Arc; and the Baltic Shield. The first crosses from Portugal through southern Spain. The second stretches from the Czech Republic through Hungary, Slovakia, Bulgaria, Ukraine, Romania, Serbia, and into Turkey. Number three, the Baltic Shield, traverses from western Russia through Finland, Sweden, and Norway. Europe’s gold mining contribution is approximately 1.2% of global mine production (though demand from the EU is roughly 15% of worldwide totals). Sweden, Finland, Spain, and Bulgaria are currently the largest gold producers in Europe. They mine about 640,000 million ounces of gold annually. Other countries with operating gold mines are Greenland, France, Greece, Romania, Portugal, Slovakia, and the UK. Among the gold companies operating in the region are Eldorado Gold (EGO) in Greece and Romania; Agnico-Eagle (AEM) in Finland; and Gabriel Resources (T.GBU) in Romania, as well as other majors and juniors across the continent.

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