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Investing in the Ireland Gold Rush

Written By Geoffrey Pike

Posted July 15, 2015

irishgoldDalradian Resources (TSX: DNA), a mining company, is pursuing gold mining in Northern Ireland. The company claims that at least 3 million ounces of the yellow metal lies beneath the ground in the more rural region of Ulster.

While the area has been explored unsuccessfully in the past, Patrick Anderson, the company’s CEO, is confident this time will be different.

It is in a mountainous area of a relatively poor region, at least by U.K. standards. Dalradian purchased the project back in 2009, and there is already some work done from the previous exploration company in the form of a big tunnel.

Still, it is not an easy project and far from a sure thing. There is a lot of work to do at this point just to make it a functioning mine that is actually producing gold, let alone enough gold to cover the costs of the project.

And not only does Dalradian have the hurdle of finding and extracting the gold, it also has the hurdle of government bureaucracy. The company will have to submit an application, which will include an analysis of potential environmental impacts, and it could take a year for approval – if it is approved.

There are certainly a lot of variables in this business. It gets harder when companies are mining in places that aren’t necessarily friendly for business.

The price of gold itself is a major variable that mining companies must contend with. Even if gold extraction is successful, companies must calculate the cost of extraction vs. the actual market price of gold.

If it costs an average of $1,100 to extract an ounce of gold, then it may be worth it when the gold price is $1,200 or higher. If the gold price drops to $1,000 per ounce in the middle of the project, it is financial trouble for the mining company, unless it happened to hedge its bets with futures or options.

A Gold Boom

It will be interesting to see if Dalradian gets approval to move forward with its mining project. It is located in a part of Ireland that is known for its nature and beauty.

The company is attempting to curry favor with the local population by funding community projects. It is also promoting the fact that a successful mine will mean employment opportunities for the local population.

A small mining company was recently granted permission to move forward with a development located not far away. Perhaps Anderson and the people at Dalradian are taking this is as a positive sign.

Considering that this is a relatively poor area, it would be hard to believe that the people and the politicians would not want this to go forward. Unfortunately, common sense does not always prevail.

In terms of environmental concerns, it is not as if they are building a massive power plant there. Sure, there will be some big machinery, but much of the work is basically done underground trying to dig and extract the gold.

It would be a shame if the local community drives this project away. Gold mining is already an extremely risky business. Strict regulations and red tape make it worse. In addition, the company needs some assurance that its property rights will be respected and that it will be able to retain the fruits of its labor.

While it is understandable for the locals to be skeptical of outsiders coming in for exploration, I think most will realize that it will probably mean more opportunity for the community. When businesses set up shop, they bring with them jobs and capital investment.

Meanwhile, Dalradian is hoping to strike gold, literally. There is certainly a correlation between risk and reward. This is a risky venture, but also one that could end up paying off well.

Three million ounces of gold would currently be worth about 3.5 billion dollars, assuming the estimates are correct. For a little mining company setting up shop in rural Ireland, that would be one heck of a score.