I will respond to the second part of your note first. I believe Gata is doing the best they can, unfortunately, they do not have the resources to take on the bullion banks, the cb, nor the producers. They are making a valiant effort to disseminate the message, but it is largely falling on deaf ears, and those that appear to be sympathetic are not willing to take on the interest that are profiting from low gold prices.
If I were in a position to influence the producers the following is an outline of the agenda I would put forward.
1. Moth ball all mines that are losing money, replacing the lost production with purchases of gold from the cb(the boe has been nice enough to provide 25 tonnes on a regular basis making it easy to plan for deliveries to customers). I would rather break even on a transaction(buying from the cb's at the spot price and reselling into the market) than go to a great deal of effort to extract a mineral from the ground at great cost and effort only to lose money. The producers would retain the unmined gold as inground reserves that would have a tangible value when determining the share price of the companies stock. This would be a win win situation for the producers. Reducing supply, putting pressure on the banks to make good delivery of gold, and not diluting the companies reserve base.
2. I would eliminate all forward sales with leased gold as part of the transaction, particularly those structured to finance new production. Delineating reserves is one thing, developing a mine is another , particularly when future production is sold forward increasing supply at the spot market.
3. Contracts for borrowing money from banks have to be restructured. Presently, the terms are holding the producers in bondage, particularly when the derivatives include various synthetic option arrangements that expose the producers to undo risks.
4. The board of directors of many producers have members who interests differ from those of the producing companies, vote them out.
5. Engage an organization to monitor the supply and demand fundamentals of the gold market whose interests are with the producers. Currently the WGC is not working for the producers, which is evident by the presence of certain individuals who work for the gold desks at some of the major brokerage houses.
6. Be independent, be smart, and remember who the owners of the company are: the shareholders, not the bankers.
Ken |
