Source: Theta Gold
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  • The South African government is looking to revitalise its mining sector to help boost its economy in a post-COVID world
  • President Cyril Ramaphosa has outlined a plan for the country to target three per cent of global exploration expenditure while making it easier for miners to secure necessary licenses
  • This is part of South Africa’s strategy to rebuild the country’s mining sector back to its former glory
  • However, this means ASX-listed Theta Gold Mines (TGM) is in a prime position to cash in from the new strategy
  • The company is building up an open-pit mine near the town of Pilgrims Rest, which was the site of South Africa’s very first gold rush back in 1873
  • With mining revitalisation in South Africa complementing Theta’s clear-cut strategy, the company is a juicy stock for the savvy gold investor looking for the next “big swing”

South Africa, once the gold capital of the world, is looking to return to its mining roots to rejuvenate its economy in a post-COVID world.

Over recent decades, the nation’s gold production has dwindled to a fraction of what it once was, and South Africa now ranks eighth for total gold production after being in the top spot throughout most of the 1900s.

Now, with South Africa’s government looking to rebuild the country’s mining sector back to its former glory, some ASX-listed gold stocks are in the perfect position to cash in.

A revitalised minerals sector

The South African government has opted to prioritise its mining industry as a way to offset the devastating economic losses wrought by the coronavirus crisis.

As part of the plan, the South African Government will develop a strategy over the next three months to target three per cent of global exploration expenditure. The plan will also halve the time it takes to secure relevant mining licenses, making it simpler for upstarts to dig up precious South African metals.

Importantly, the government will work to secure consistent electricity for the mining sector as Eskom, South Africa’s main power provider, struggles to produce enough electricity to meet demand.

“Simplifying and modernizing mining regulation will unleash significant investment by business in exploration and production, generating substantial employment, both directly and indirectly, as well as contributions to the fiscus and foreign-exchange earnings,” South African President Cyril Ramaphosa said, according to a document obtained by Bloomberg.

The move has been supported by the Minerals Council of South Africa, which is a mining industry employers’ organisation made up of 76 members and representing 90 per cent of South Africa’s mineral production by value.

The Minerals Council CEO, Roger Baxter, said the COVID-19 pandemic has just made an already-struggling economy suffer more.

“The economy has run into several structural constraints (electricity, rail and ports) and institutional constraints (red-tape, declining capacity in the state to enforce law and order, etc.), which have basically resulted in the collapse in the country’s productivity growth and potential growth rate,” Roger said.

“These structural and institutional constraints need to be urgently addressed,” he said.

“Like the rest of the economy, the mining industry has significant potential, and if the issues holding it back were to be addressed, this potential could be unleashed, enabling the industry and the country to embark on a new path of inclusive growth and investment, and ultimately, a better future for all.”

Roger Baxter, September 2020

What does this mean for the ASX?

On the Australian share market, there are two prominent up-and-comers looking for gold in South Africa: West Wits Mining (ASX:WWI) and Theta Gold Mines (ASX:TGM).

West Wits Mining

West Wits has was thinly traded four most of the year, with shares floating around a flat one-cent each from September 2019 until late-June 2020.

However, the company’s share price has quadrupled over the past three months, rising to two cents each on June 29, then hitting a four-year-high of four cents per share on Friday, September 18.

The company completed an independant scoping study on its Witwatersrand Basin Project in South Africa on July 30, and since then has raised $3.4 million for a bankable feasiblity study at the project. West Wits plans to kick off gold production in mid-2021.

Theta Gold Mines

Theta Gold, on the other hand, has not yet had this share price “take-off” moment in 2020, despite being considerably more advanced.

Theta shares have been trading between 20 and 30 cents for most of 2020, having made it through the brutal March COVID-induced sell-off relatively unscathed.

Theta is also targeting production for 2021, and its strategy is clear: use new mining techniques to take advantage of old gold mines.

A case study by mining expert CSA Global explained that historically, South Africa was so rich in gold and full of easy targets that as soon as a target proved difficult to mine, early prospectors would pick up their tools and look for a better spot.

Since then, of course, technology has made mining easier and far more efficient — making these gold-rich targets much easier to mine than they were a century ago.

Thus, Theta plans to re-visit these old sites and use modern tech to extract what’s under the ground. The company’s flagship Theta Open-pit Starter Project is near the town of Pilgrims Rest, which was the site of South Africa’s very first gold rush back in 1873.

The project has a resource base of over 44.8 million tonnes at 4.18 grams per tonne for over six million ounces of gold, and Theta is targeting a production rate of 150,000 ounces of gold per year.

Moreover, Theta just headhunted a new CEO and Chief Operating Officer (COO) from South African big-cap Harmony Gold.

The company appointed Mitford Mundell as CEO of African operations and Jacques Du Triou as COO of African operations. Both men will begin their work at the company on October 1, 2020.

Looking ahead, Theta plans to have an open-pit permit for mining and project financing by the end of the year, significantly de-risking operations. The company has recently dual-listed on the over-the-counter (OTC) markets in the U.S. under the stock code TGMGF, meaning investors have several options when chasing a stake in the company.

With mining revitalisation in South Africa now complementing a clear-cut strategy, Theta Gold is a particularly juicy stock for the savvy gold investor looking for the next “big swing”.

The question, then, remains: will investors seize the opportunity while they can, or will they kick themselves for waiting too long?

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