Cash is king in the quest for battery metals
It was the largest of its kind in US history. A couple in Northern California had found $10 million in rare gold coins buried on their property. Inside eight metal cans there were more than 1,400 coins. Nobody knew how they got there or who they might have belonged to, but the couple didn’t care. These coins would transform their lives and had the power to turn their dreams into reality.
This is the power of gold!
At Blackstone Resources, we dream of a day when all cars will run on electricity, while renewable energy will finally become sustainable. We need battery metals such as cobalt, manganese, molybdenum, graphite and lithium to make this dream come true. This is why we also take an interest in gold.
Of course, ever since the gold standard was abandoned – first by Britain in 1931 and then by the US in 1933 – cash has been king. Therefore, it’s the cash from gold that we are after.
Here in Switzerland, we have a long-lasting love affair with cash. It’s very important to us and has been a significant driver behind the success of Switzerland’s most prosperous companies. The reason is very simple. Cash pays for a business’ future growth and it covers the costs involved in this process.
Here at Blackstone Resources, we have an 20% equity interest in a gold mill in Peru, which is very important to us. It will provide a steady cash flow in the future for the business. We chose this investment because gold is reliable: 90% of gold demand is based on its intrinsic value.
Gold has always been in limited supply. Despite the best attempts by medieval alchemists, it’s impossible to make more gold. Therefore, it’s likely to always remain valuable. Mankind has dug up 190,000 tonnes of gold during the course of human history, and there are only another 54,000 tonnes in the ground that are economically viable to dig up.
It’s price swings from time to time, but throughout history, you have always been able to get a decent amount of cash for it.
Our Peruvian gold project is progressing well
A significant amount of time and effort has already been spent constructing the gold mill I mentioned in Peru. Once it’s up and running the ore that’s milled will have at least a grade of 15 grams per tonne. Well will start small and increase to 50 tonnes per day. This will then increase later to 350 tonnes of ore per day once the main mill is running.
This final amount would equate to 5.25kg of gold or 185 ounces per day and the international price of gold around $1,200 per ounce. At $1,200 per ounce that equates to $222,000 and with a 250 work-day year, that equals $55.5 million.
The net profit has been estimated to be 16% of turnover. Using a more conservative 10% that would mean $5.5 million of cash every year. The cash from our equity interest would therefore allow us to invest in new battery metal interests and increase diversification across the battery-metal mix, widening our exposure to this mega-trend.
We like cash because it allows the company to operate in an even more strategic and proactive way and take full advantage of the investment opportunities it sees in battery metals. There’s a lot of activity. There’s a lot of exciting projects. There are also plenty of opportunities. But you need cash if you want to take advantage of the surging demand for battery metals.
This is why we will continue to invest in assets that will be cash-producing in the near future. It is also the reason why we believe cash is king in the quest for battery metals.