> POG is the key variable
Sure, but it is not a linear 1:1 relationship. A 10% drop in the price of gold does not result in a 10% drop in reserves. Barrick dropped their price point by 10%, resulting in a 2% drop in reserves. There is a lot of economic gold still available even at $250. Many of the firms we like have cash cost closer to $100 ! (MDG, GLG, etc...)
> Much of the SA reserves calc is pipe dream and fantasy gold.
Most RSA numbers are in the resource, not reserve category, exactly for that reason. I do not think we have to worry about RSA reserves going down with lower gold prices, but with resources getting converted back to reserves when gold prices go up. If we ever get back near $400, RSA gold reserves would probably double.
> Replacement of production? Highly questionable
I read a lots of new release and annual reports where companies are very proud of the fact they manged to replace their annual production. It is weird seeing annual production and reserves going up, but it happens. Miners have two primary objectives, production and converting resources into reserves. One can do it without spending big exploration dollars.
> the five year number is more accurate than the nine or twelve
You remind me of this on March 11, 2006 when the last gold mining company closes their operations based on these static historical calculations. Business is dynamic. The technology of heap leaching allowed miners to continue despite lower prices, maybe bioleaching will bcome viable, maybe gold prices will go up in the next five years and exploration will resume, maybe investment capital will be avialable and current marginal projects will become viable.
I do not know, but I am a big fan of Julian Simon and his book "The Ultimate Resource" |
