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Gold/Mining/Energy : International Precious Metals (IPMCF)
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To: Karl Zetmeir who wrote (20916)9/17/1997 1:02:00 PM
From: Claude Cormier   of 35569
 
<< Are we beginning to see the impact the POG as well as the potential of huge low cost production DD resources coming online will have on many gold companies? >>

Karl,

Even if the DD come on stream in 4-5 years with production costs as low as US$100, this will have little impact on gold prices and gold producers.

As you know the demand for gold is growing and will continue to grow at a very conservative 3-4% per year on average. 1997 demand is up 14% so far and the trend is accelerating as gold prices go lower.

This increase in demand for 1997 represent more than 200 tons of gold for the first 6 months only.

So even if the DD eventually end up with a reserve of 6500 tons (200M ounces of gold), they will never realistically produce much more than 200-400 tons per year. This new added production, altough very significant, will still be relatively small and will only replace the gold currently produced by very high costs mines in South Africa and elsewhere. The demand/supply picture will remain unchanged. And if you compare this potential new reserves to the existinmg above ground reserves that are in the 100,000 thousand range...their is no cause for alarm. The world population is growing, the monetary aggregates are expanding, there are more rich people.

Of course, the PGE's are another story and this market could really be hurt much more than the gold market.

But before we start speculating on the above, we should first wait for the DD to show some gold resource...

CC
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