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

To: long-gone who wrote (82121)	2/15/2002 1:16:06 PM
From: goldsheet	Read Replies (3) \| Respond to of 116960

Today's Rant - Production, Reserves, and Resources eventually affect and are affected by the gold price. Anyone who has follow my incoherent rantings knows I have never believed the lower gold prices of the last five years would lead to lower production, and it has not as gold production continued its rise. I also do not believe predictions it will plummet by 2010 are likely, especially now since gold prices appear to be firming up near $300 instead of around $275. $25 doesn't seem like much unless you are mining million of ounces or mining a marginal property, then it is enough to generate plenty of cash flow or keep a property open. $25 makes all the difference. Likewise, I am no fan of the theory of mine depeletion. You have a mine with 100,000 ounces of reserves, you mine 20,000 per annum, and it is closed in 5 years - WRONG. This assumes the world is static, prices do not vary, costs are not decreased, technology is not improved, resources are not delineated, resources do not become reserves, new resources are not found, etc.. Every shovel contains new information and makes reserves/resources historical data. Sure there are many smaller high cost old mines that can and should be shut down, but some of the new mines can (and have) easily replaced the production of these many small mines. Also, since exploration budgets had dropped, it doesn't mean no one is looking for gold - Goldcorp and Agnico Eagle are perfect examples of firms that have found plenty of gold in current gold mines. The excess exploration funds spent in the mid-90s (why not look at the 90s as an excess over normal exploration, instead of now as a drop?) resulted in more than a few good gold finds (in addition to more that a few juniors screwing investors). These finds are still there, some are marginal at $275 (like Pascua Lama) but they will eventually come online. Now I hate to mention individual firms, but the reserve/resource numbers out of Barrick yesterday were GREAT !! After producing 6.1moz, reserves went from 79.3moz to 82.3moz, which means they added 9.1moz, replacing 150% of production. (Tanzania went from 10-12, while Veladero went from 3.9-to-8.4) One might think they just moved resources into the reserve category, and it would have dropped, but it also went up. Barrick managed to locate over 18moz internally, not bad at all. Newmont paid billions for Normandy to get 26moz of reserves, while Barrick found close to 70% of that in-house. Another way to look at it is Barrick found enough gold last year alone to cover their entire gold forward sales contracts. FYI, this makes Barrick 20% hedged, 80% unhedged, relative to reserves. For 2002, 50% of production is sold at $365, and the rest will be sold at spot. REF: biz.yahoo.com