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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (42613)	10/10/1999 8:53:00 PM
From: goldsheet	Read Replies (1) \| Respond to of 116779

> Mining production would not have risen anyuthing near 20% without > this corrupt leasing game. Leasing has enabled some producers to > keep mines open much longer than they should have during a bear > market. There is a time lag between gold prices rising and mines going into production. In 1985, when gold production was 1500mt, gold prices shot up to $500, lots of capital was invested, gold production got up to 2000mt by 1989, then gold went back down to $330. Production stayed pretty flat, until gold rose again in 1993 to over $400, more capital was invested and production moved up again to the 2500mt level by 1997, when gold went back down to $330. Mining is a very capital intensive industry and once you have the "sunk cost" one is reluctant to walk away. Depreciation is a non-cash expense, so even though earning may stink, one needs to maintain positive cash flow to pay off all the debt incurred to develop the mines. As long as the market gold price exceeds the marginal cash cost per ounce, it makes sense to keep producing. It has a lot more to do with basic financial accounting than leasing or forward sales. I do think the weird leasing stuff did take us down to $255, but we are back to basic supply/demand, and for some reason $330 gold sounds like a "fair price" to me, although I think we may test $300 again.