Black Cat Syndicate (ASX:BC8) is launching a bold strategy to build up and retain a minimum of $20 million (4,000 ounces) of production in dedicated gold bullion storage.
Managing Director Gareth Solly says while Black Cat is not a bullion bank, “we are not a cash bank either.”
“It is hard to justify producing a safe haven asset, in gold, and then converting that asset into an asset losing its purchasing power, in cash,” Solly says.
With increasing production, Black Cat’s strategy is to build up and retain the gold bullion storage, which at the end of May saw $24 million (4,500oz) retained.
In addition to its bullion, Black Cat has 2.5 million ounces of gold in a growing resource base. Gold is a high-quality, liquid asset that is free from credit risk and accepted across borders and has a history of retaining its purchasing power.
Cash will continue to be retained by the company for growth and working capital purposes.
The bullion is trading stock to the company and as such, will be valued at the lower of cost and net realisable value for accounting and income tax purposes.
Accordingly, unrealised profits on the bullion will be recognised by regular revaluations as opposed to sales, and then realised profits taxed at the point of eventual sale.
The company says investors seeking leverage to gold, both in bullion and resources, can now consider an investment in an unhedged Black Cat.
“At the end of the day, we are in the gold business and investors can choose Black Cat because they are seeking leverage to gold. And yes, the gold price could go down, and we will hold sufficient cash to cover such a contingency,” Solly says.
“We will regularly review how the strategy fits with the company’s cash requirements, risk profile and investor expectations.”
Black Cat covers the full spectrum of the gold business with visible gold in core, gold in stockpiles, gold in circuit and last, but not least, gold bullion.
Write to Adam Orlando at Mining.com.au
Images: Black Cat
