by Max from Onestock June 2, 2020
The coronavirus pandemic has left virtually no portion of the world unscathed, not only from a public health perspective but from an economic perspective as well. As entire economics virtually shut down, millions were left without a source of income.
The governments of the world quickly stepped in to provide stimulus to their citizens and additional benefits to those who lost their jobs due to the pandemic. In the United States, stimulus checks of $1,200 were sent to almost every individual.
They were sent out in such haste that even dead people received them. Unemployment insurance benefits were quadrupled for many people.
With all of this money flowing around, it begs the question—where is all this money coming from?
What the Federal Reserve and other central banks are actually doing may be cloaked in complicated terms and concepts, but what is really happening is that the central banks of the world are simply printing more money.
And this is essentially what central banks do. When they feel the economy is too slow, they print more money. When the economy is too fast in their opinion, they slow down the supply of money by not printing as much money.
The manipulation of the supply of money is nothing new. Central banks do this all the time when they set interest rates or call for quantitative easing. But it is the magnitude of the stimulus and these increased benefits that makes the current global situation so significant.
When you print more money, you decrease the value of money. This is because when there is more money chasing the same amount of goods and services, the price of these goods and services will rise. This rise in prices is called inflation. While inflation is almost always considered a bad thing, central banks actually believe that an inflation rate of around 2% is good. By decreasing the value of the money you’ve earned, they argue, it provides an incentive for citizens to continue contributing to the economy.
In stark contrast to the unlimited supply of money, gold has a limited supply. Gold’s supply is limited because it is difficult to obtain. The shiny yellow metal is located underground deep in the earth and significant capital, labor, and effort are required to extract it. When the fiat currencies of the world decrease in value, this creates a positive environment for the price of gold. As soon as people begin to notice their national currency is buying less and less, they begin to invest in gold to preserve the value of their money.
What is Inca One Gold and Why Should You Care?
Inca One Gold Corp (TSX-V:IO, OTCMKTS:INCAF) is a company with a unique business model that you won’t find in most junior miners. As such, it could offer all the potential upside with much less risk than a traditional mining company of a similar size.
Typically, mining companies the same size as Inca One depend on exploration to find new sources of gold. Inca One avoids this dependence by specializing in processing. As Inca One’s CEO, President, and Director, Edward Kelly said, “We do not have any exploration or mine development costs. There is no mining risk to us directly.”
Inca One processes gold from a large number of small-scale miners in Peru. Small-scale mining is very big business in Peru, one of the world’s largest producers of gold and silver. These small-miners comprise about 20% of the total production and these miners rely on government-authorized processors to mill their gold. Since these small-scale miners are highly competitive with each other, they are all eager to have their gold processed and sell it at competitive prices to IO.
Inca One has operated in Peru for over six years and is the first publicly-traded gold processor to gain the government’s permitting as required by law. Its processing plants, Chala One and Kori One are located in desert areas, so there is no environmental risk to worry about. The only possible negative is that the idea of hitting the proverbial mother lode is not on the table. This might make IO a less exciting investment for some. What IO offers is a stable and generous supply of gold from Peru’s small-scale mining operations. With small processors like Inca One, all the infrastructure is already in place. A rise in gold prices means that their profits will rise exponentially because of their stable and reliable gold output.
Since Inca One is focused on processing the gold sold to them by small-scale miners, its operation is not only profitable for the shareholders but also fosters a mutually beneficial economic relationship that helps the region to thrive. This means that Inca One’s operations are sustainable and supported by those who live in the region. With 65% of its processing capacity unutilized, Inca One has room to grow. The small-scale mining sector in Peru has grown by 82% since 2001 and now constitutes a value of $1 billion.
The government of Peru began a four-month amnesty period beginning January 15, 2020, which gave new and existing mining operations the opportunity to register with the Ministry of Energy and Mines. This re-opening of the formalization process has led to a 22% growth in the number of miners registered as of March. This growth means that Inca One can build relationships with these new potential customers who have registered through the program. Due to the COVID-19 pandemic, the amnesty period was extended for up to 30 days after normal business activities resume.
Gold has been a so-called “safe haven” asset for thousands of years. Rough economic times have historically been positive for the value of gold. With central banks increasing the money supply at staggering rates, the demand for gold is poised to increase as people look for a way to preserve the value of their savings. This rise in demand will also put pressure on gold producers to increase supply. Inca One provides a way to benefit from the rise in gold demand without the mining or exploration risks associated with many other gold mining companies. Inca One also supports small-scale miners in Peru, providing a strong economic benefit to the region and setting the standard for how the mining industry can build a positive reputation.
Please read our full disclaimer by clicking here. Statements regarding the Company which are not historical facts are “forward-looking statements” that involve risks and uncertainties. Such information can generally be identified by the use of forwarding-looking wording such as “may”, “expect”, “estimate”, “anticipate”, “intend”, “believe” and “continue” or the negative thereof or similar variations. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements due to factors such as: (i) fluctuation of mineral prices; (ii) a change in market conditions; and (iii) the fact that future operational results may not be accurately predicted based on this limited information to date. Except as required by law, the Company does not intend to update any changes to such statements. One Stock Weekly believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included herein should not be unduly relied upon. This article shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.