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Gold/Mining/Energy : At a bottom now for gold? -- Ignore unavailable to you. Want to Upgrade?

To: Giraffe who wrote (1196)	6/23/1998 2:16:00 PM
From: Ray Hughes	Respond to of 1911

Hi Giraffe, Net postings are, I assume for most persons, abbreviated versions of the full story. So it is for me. Here is some expansion of what I intended for readers to grasp. SA gold miner hourly wages were low but that doesn't tell the full story. When SA produced well over 50% of world's yearly supply of gold (as recently as 1987) SA production costs were, and still are, very labour intensive. Travel to 10,000 feet deep, and return, takes about 1 hour each way. At the stope, working face rock temperature is 140 degrees F so chilled water is used in drilling to reduce air temperature. This raised relative humidity to 100%. Human body can't cool through respiration so kidney belts with chilled gel packs are employed to prevent heat prostration and, thereby, improve productivity. However, every 2 hours gel packs have to be changed so more time is lost. Workers put in about 4 hours of productive work per shift. Remember, too, that deep timbered mines take much more labour hours per tonne of ore to maintain shafts, stopes, air/water/electrical/refrigeration services, timbering, flood control, security of explosives (social unrest??), etc. For this reason one must at least double SA hourly wages (in US$) to make comparison of African miner wage cost/tonne versus underground mining elsewhere. Get a few SA gold mines' Annual Reports. They do an excellent job of breaking our operating costs. You will see that mining/milling wages comprise a large portion of production costs. And, yes, SA wages were rising exponentially as the union used unrest related to unwinding of Apartheid, to push up wages. Also, living conditions in camps had to be improved (I've been in miners' living quarters - they were horrid!). I repeat, general mining wage increases, not offset by productivity gains, translate into rising operating cost per ounce of gold produced. This tendancy for wage inflation in the cost of gold production for underground mines anywhere in the world maintained a "natural" lid on long term supply of gold and as a generalization, kept its price moving upward (with lags) with the general wage inflation. I've got models of about 40 SA gold mines on Excel spreadsheets with complete production, operating cost, taxation and profit breakdowns from the period of '79-80. I can document that from 1985 to 1995 weighted average US$ cost of SA gold production rose from $85/oz to $300/oz mostly due to wage labour cost increases. "Virtually" almost entirely : for all practical purposes. Webster's New Collegiate Dictionary. In this case the practical purpose is to intimidate ring traders into stopping their buying by selling enough to make it clear to them that the seller will persist until the trader tires of seeing prices for his/her book position decline into the loss column. The trader, not being totally dumb and figuring another commodity might be profitable, sells off his/her gold book position. Objective achieved, the seller buys back lower and possibly breaks even. What matter if there is a small loss accumulated in this bear raid when measured against the huge National Debt Service cost savings achieved by keeping gold price, and hence interest rates, lower? Bank of Commerce, Jidah, Saudi Arabia selling physical gold two days before every US Treasure auction for three years running. SA Treasury finally published notices telling the Bank of Commerce to cease bear raid or SA would cease delivering gold and put the squeeze to the Bank. Who do you think was behind the Bank?? Don't fight the powers that print money - they are bigger then you and me. RH