Larry, re: my response @ 2 years: <font color=green>"The very management personnel they (mutual fund managers) have to survey in order to re-jigger their spreadsheets don't even agree on what they are going to do or if this above $400 is "for real"
They probably won't believe above $400 is for real for another 2 years, frankly...the last 22 have been so very very brutal." </font>
Acc'd to Price Waterhouse survey results released this morning, I may have been "too quick" in my 2 year statement...especially if the only 10% incremental increase per year is the "modeling standard" adhered to in future years.
feast your peepers here.
OPEN QUOTE under Fair Use Doctrine for educational purposese only:
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Gold miners cautious in gold price estimate
Consensus US$337 an ounce: Price is used to calculate reserve estimates
Drew Hasselback
Financial Post
Tuesday, December 16, 2003
Gold miners are taking a cautious approach to the gold price in their 2003 yearend reserve calculations, a survey reveals.
PricewaterhouseCoopers contacted 46 gold miners around the world and asked what price they will use to calculate their reserve estimates in upcoming 2003 annual reports.
The results, released yesterday, show the average price will be US$337 an ounce. That is about 10% higher than the average of US$305 that was used in respondents' 2002 annual reports.
At US$337 an ounce, the 2003 estimate is rather conservative given current gold prices of more than US$400 an ounce.
"The industry probably feels comfortable that there's a certain amount of conservatism in its numbers," said Paul Murphy, leader of the Canadian mining practice at PricewaterhouseCoopers.
Answers from specific respondents were kept confidential, since final reports will not be published until early next year.
Respondents included all 10 of the world's largest gold producers, including Denver-based Newmont Mining Corp., Toronto-based Barrick Gold Corp. and Kinross Gold Corp., and Vancouver-based Placer Dome Inc.
A reserve is an estimate of how much gold remains in the ground. The price is the key to the calculation. A gold deposit is worthless if its location or its geological conditions render it too expensive to mine at a profit. But if a company assumes a higher gold price, it can justify boosting its stated gold reserves. The richer metal prices will cover the costs of mining more expensive deposits.
So even though the gold price has already risen more than 21% during 2003, miners have raised the average reserve calculation price by only 10%.
"I think the companies are being somewhat cautious," Mr. Murphy said.
PricewaterhouseCoopers included mining firms from Canada, South Africa and Australia in the global survey.
Part of the conservatism may reflect the higher costs those companies face due to the rise of their local currencies relative to the U.S. dollar.
Gold is traded in U.S. dollars, so a rise in the greenback squeezes profit margins at mines based outside the U.S.
"While the weakened U.S. dollar may be one of the prime reasons gold has risen so dramatically, it has also had a very negative impact on those producers operating outside the U.S. who are incurring expenses in much stronger currencies," the survey states.
PricewaterhouseCoopers also collected data on the average price used to calculate carrying value. This year that number will average US$347 an ounce, up from an average of US$307 in 2002.
Mr. Murphy said the survey is aimed at helping mining company boards of directors and their audit committees. That data provides them with some guidance as to how their peers are reacting to the changing price climate.
This has been particularly helpful in the past, when gold prices were dropping and miners had to take writedowns, Mr. Murphy said.
"You need to be able to defend the price that you use. An auditor, or even worse a regulator, might choose to challenge a company on the position that it took."
© National Post 2003
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Nothing like getting the scoop via SI before it becomes "mainstream news, eh?"<vbg>
No wonder equity investors are frustrated in not seeing more "action" in their rav fav stock pick, or their NAV participation.
BTW...just to refresh my memory, Fidelity Select Gold formerly only held primarily US Bullion coins if memory serves (about 10 years ago?)...what is their portfolio mix acc'd to your latest statement?
g_t |
