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Gold to reach $350.00?

  1. Newmont tips bull run for gold
    AFR
    Aug 6
    Peter Klinger

    Newmont Mining Corp is fast-tracking efforts to unwind the Normandy Mining hedge book as pace gathers for what president Pierre Lassonde describes as the beginning of a substantial gold price bull run.

    Mr Lassonde, one of the world's most prominent gold bulls, told a packed Diggers & Dealers mining forum in Kalgoorlie the bullion price was set for a major recovery against a backdrop of falling gold production, increasing pressure on the US currency and what he referred to as the major global economic and political dislocation.

    "We are in a fundamental gold bull market," Mr Lassonde said. "It might not look like it, it may not feel like it, but believe me, we are in a bull market."

    He said Newmont would be revealing details within a few weeks on how it would speed up efforts to close out Normandy's hedge position, which at last quarter balance date was $411 million in the red.

    "What we don't want to be is a hero one day and zero the next," he said. "We want to opportunistically close it [the hedge book] down as fast as we can."

    In a keynote first-day address that is likely to set a positive tone for the remaining two days, Mr Lassonde said he was confident gold would jump to $US325 to $US350/ounce within the next 18 months.

    Gold was trading at $US307.50/oz yesterday.

    Mr Lassonde said an unhedged industry needed gold prices of at least $US325 to survive.

    "Nobody makes money at $US275," he said.

    "The companies that have hedged their production might, but the return on capital at $US275 is about 3 per cent ... and our cost of capital is about 9 per cent.

    "At $US350, this industry is going to start making money and that's where in the longer term we think we should be."

    He threw down the gauntlet to Australia's exploration companies, urging them to consider farm-in options on some of Newmont's massive 40,000 square kilometre land bank.

    Newmont is allocating $US21 million ($39 million) this year for exploration in Australia, although most of the money will be spent onbrownfields or exploration within a 150km radius of existing operations.

    The gold giant has also begun an optimisation study with joint owner Barrick Gold Corp of key asset the Super Pit at Kalgoorlie.

    Both Mr Lassonde and John Dow, the managing director of Newmont Australia, also conceded the 750,000 oz a year Super Pit was not achieving acceptable returns, although they said it was too early to reveal remedies.

    Barrick senior vice-president, exploration, Alex Davidson said the miner preferred full ownership of the Super Pit over a half-share, further fuelling suggestions that one of the two parties will forfeit rights to management control in return for a substantial, one-off payout.

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