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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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We’ve Never Seen This Before In The Gold Market

It might prove to be a one-off. But one group in the gold industry this week forged ahead with a unique strategy — which might just change the market.

The group is India’s largest jewellery-maker, Rajesh Exports. Which said that it is taking an unusual step in securing gold supply for its operations.

Buying gold mines.

The firm’s owner, Rajesh Mehta, told reporters in Australia this week that he is visiting the country to vet potential mining acquisitions. Adding that his company has hired investment bankers to identify assets that could “ensure a reliable and permanent gold supply-line to our company”. Related: Many Big Guns Still Betting On Oil Comeback In 2015

The buys are apparently sizeable. With Mehta indicating that he may spend up to $700 million to acquire “equity or loan” interests in mining projects.

“We would also like to invest in the retail jewelry sector in Australia,” he said. “That is, take the gold from here, process it in India and then supply the jewelry back here in the retail line that we set up here.” Related: This Is What Will Determine If Oil Prices Go Up Or Down

Of course, the words of one company don’t make an industry trend. But in the case of Rajesh Exports, the firm does have substantial clout in terms of gold demand — currently consuming about 140 tons per year of the metal. Equal to about 15% of India’s total yearly gold import volume.

That sort of demand — not to mention the equity injection that could come with it — would be a major boost for Australian gold miners. Related: Putin May Have Last Laugh Over Western Sanctions

It also signals an interesting trend in natural resources of late. Where end users of metal globally are becoming some of the most active parties in funding new mining projects.

We’ve seen similar moves from state-owned metals firms in Asia — in markets ranging from copper to platinum to coal. But the Rajesh Exports asset buy would be one of the first-ever project transactions by an end user for the gold market. Watch for announcements on specific investments for the firm.

Here’s to going to the source,

Dave Forest

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