still positive on gold, page-3

  1. 9,081 Posts.
    Even if charts are open to interpretation, on a fundamental "supply / demand" basis, the bull market in gold looks set to continue for quite some time:

    TORONTO -- Today's gold reserves could be depleted in 10 years unless major producers start pouring more money into exploration for new deposits, the head of exploration for Toronto-based Barrick Gold Corp. said yesterday.
    "The current state of affairs in exploration spending is untenable for the health of the industry," Alex Davidson, Barrick's senior vice-president of exploration, told delegates to the Prospectors and Developers Association of Canada annual convention, being held this week in Toronto. "The big companies need to spend more on exploration -- or else, at current annual production rates, reserves will be depleted in 10 years."
    Mr. Davidson said the industry also needs to attract more speculative capital back into junior mining companies, which have historically provided a pipeline of new projects.
    The past five years have been the harshest in nearly three decades for exploration spending, he added, as historically low metal prices, a decline in investor confidence and industry consolidation all contributed to lower exploration spending.
    Faced with declining reserves, gold companies bought or merged with competitors. But that consolidation, while improving reserves in the short term, hurt exploration as merged companies slashed exploration budgets and projects.
    Before Denver-based Newmont Mining Corp. bought Australian producer Normandy Mining Ltd. in 2002, the two companies had combined exploration budgets of $111-million (U.S.), Mr. Davidson said. Post-merger, that dropped to $73-million.
    Similarly, Barrick and U.S. rival Homestake Mining Co. had combined exploration budgets of $149-million before Barrick bought Homestake in 2001. Post-merger, that dropped to $104-million, Mr. Davidson said.
    Over all, exploration spending by gold producers fell from a peak of about $3.3-billion in 1997 to $900-million in 2001, he said.
    Consolidation may also contribute to a shortage of skilled exploration workers, he added. "Fewer companies translates into fewer jobs, which translates into an ever-shrinking talent pool."
    Companies have also been spending less on exploration-related research and development, Mr. Davidson said. That could hurt producers because they have been mining easily accessible deposits, whereas new techniques and equipment could help profitably mine other ore.
    "With most of the low-hanging fruit already picked, new technology could be crucial" to mining many deposits, he said.
    Mr. Davidson, credited with the discovery of an 6.5-million-ounce gold deposit at Alto Chicama project in Peru, a find that Barrick announced last year, said there have been some positive consequences for exploration from the consolidation rush. Deals have resulted in companies having access to larger land packages and exploration sites in new countries.
    A higher gold price is driving some new exploration spending, but the industry needs to see a $350-an-ounce level for five or six years to generate the kind of exploration that will lead to significant new large deposits, he said.
    "Given that most projects on average require five to eight years from discovery to production, we are not currently funding exploration at levels required to replace reserves," he said.
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