A few excellent "micro" points on our favorite topic from the Seabridge material. The last point by Corrigan is especially significant now:
"The average mined grade of the top five North American miners is now 40% higher than the reserve grade. That implies the average and lower grade ore is being left and may never be mined."
Bob Buchan, President, Kinross Gold, April 10, 2001
"The return on capital for the world's six largest gold miners was only 4% last year...versus a 10% cost of capital. These companies are literally destroying shareholder value for every ounce they produce."
Pierre Lassonde, President of gold giant Franco-Nevada, April 23, 2001
"The contango between front and fifth generic futures is currently at $3.40 or 1.45% of the front price. Such a low level has only been seen twice before in 20 years...in spring 1993 after gold roared $83 or 25% and in summer 1999 when it managed $95 or 37%."
Sean Corrigan, Capital Insight, May 21, 2001
Note: The contango (forward rate)this morning for the one month and the one year is now a mere 1.69% and 0.90%. The Dec.01 is quoted at 290.10 and the Dec. 02 at 293.50. Now 3.40 (1.17%) for SIX generic futures out. NO INCENTIVE TO HEDGE (why, would they want to do so at what is effectively the spot price in the out futures?)and a lot of incentive to engage in a massive buy back (effectively a free loan to purchase gold, no wonder the specs are hanging in).
Important! The focus should be on the forward rates, not just the lease rates!
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