Climate Finance | September 22, 2022

A safe, low-carbon way to store your gold: Leave it in the ground

David Bank
ImpactAlpha Editor

David Bank

What’s the most eco-friendly way to mine gold? 

Not to mine it. 

Nature’s Vault, a blockchain-based finance company headquartered in Singapore, is buying up mining claims in Canada for the express purpose of not digging for gold. Instead, the company is selling crypto ‘legacy tokens’ that serve as digital proof of the underlying value of the gold.

“When someone buys our token, they’re buying a quantifiable amount of gold that our company commits to preserve,” CEO Phil Rickard tells ImpactAlpha. “We’re a token that’s attached to a real world asset.” 

As unusual as that may sound, consider that most traditional buyers of gold never see their assets, either, and have only a digital record of their holdings. About half of all gold reserves sit as bars in remote bank vaults. 

Producing and refining a single ounce of gold generates nearly one ton of carbon dioxide, according to S&P. The global mining industry is responsible for up to 7% of total greenhouse gas emissions, McKinsey estimates

Nature’s Vault “gives people a way to invest in gold and feel good about it,” says Rickard, who was raised in Alberta, Canada, and made a career in hardrock mining of iron, bauxite, coal and (physical) gold in Indonesia. For vanity materials like gold, silver and sometimes platinum, he says, “There’s not really much of a reason to dig it up and stick it in a bank vault anymore.”

Staking claim

The company, through its Canadian subsidiary, Pristine Mining, is negotiating to buy a substantial gold mining claim in Ontario, Canada, called the “North Star Deposit.” In April, Nature’s Vault secured the mining rights to an estimated 125,000 ounces of gold in Pistol Lake, in Thunder Bay, Ontario. The new claim is “significantly larger” than the earlier purchase, both in land area and gold deposits, the company says.

Nature’s Vault is aming to secure rights to a million ounces of in-ground gold to back up its tokens. It has privately sold $2.2 million in tokens, and has raised about the same amount in seed funding for the company itself. The company’s seed round was led by CDI, an Asia-based data-analytics provider.

There are international standards for the geologic reports that estimate the amount of certain minerals and are used for valuing claims. In Canada, such 43-101 reports help investors value mining companies, and can also be used for determining which mines are economically viable.

Rickard has crossed such certificates with tokens issued on the (carbon-neutral) blockchain Polygon, “so we could monetize the value of the mineral asset and leave it in the ground without having to dig it up.”

The price of gold, a traditional inflation hedge in volatile markets, is currently about $1,680 an ounce. Mining claims are valuing the gold in the ground at five or six dollars an ounce. The difference is in securing permits and plans, establishing a mine, and pulling out and refining the gold over 20 years. 

“We can short-circuit and disrupt the whole process,” Rickard says. “And say, ‘There’s no reason to do that anymore. There’s no reason to take that capital risk. Let’s just go ahead and find the value now.’”