An even quicker bad outcome for Gold miners - if they have hedged too much gold production, they can be hurt by thier hedge book. This has kept the price of Barrick ABX down the past few years.
Ashanti gold in Ghana messed up their hedges really bad.
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Laurie McGuirk, a precious metal expert, has said
"Lots of things can happen with mines, almost all of them bad"
Look at the mess of Cameco's CCJ Cigar Lake Uranium mine.
Besides Government confiscation, there are strikes - see Chilean copper mines, transport bottle necks, sabotage by competing miners, cave ins, underground gas, flooding, silicosis from having to drill through very tough quartzite, explosions, etc. There are mines in the middle of the desert which flood from underground water.
Drought also can limit water for processing ore - this happens in the Northern Chile copper mines.
Not to mention civil war - look at the Congo.
Include fraud - like Bre-X
On top of this, there is a shortage of experienced mining people and equipment. This is why I like to stick with companies who are prodcuing or are very close to produciton. |
