To:Dale Schwartzenhauer who wrote (284) From: Dale Schwartzenhauer Monday, Jul 7, 1997 5:38 PM Respond to of 80032
After reading these many bearish forecasts, it might be time for a contrarian position. Also, I wonder if today's collapse wasn't exhaustion of an 18 month decline. High volume on leading NYSE gold issues, probably on futures as well. In 1976 with gold approaching $100, many were calling for a return to the old $35 fixed prices. I know that most investors see the disgorgement of central bank gold as bearish, which is certainly true short-term, but it seems to be very bullish long-term. This undermines the sympathetic backing of each currency and distributes gold to stronger hands. Is Australia going to buy back what it sold? Not likely. Returning gold to private hands is as much a massive remonetization as a stripping of power from public officials. After all, those who have the gold, make the rules.
To:Dale Schwartzenhauer who wrote (285) From: John Barendrecht Monday, Jul 7, 1997 6:01 PM Respond to of 80032
Canada gold producers seek to ride out price fall By Paul Casciato
TORONTO, July 7 (Reuter) - Canadian gold stocks tumbled alongside other gold producers as the price of bullion fell further on news that Australia's central bank had sold a large portion of its gold reserves.
Stocks of Canada's biggest gold producers fell, but losses were limited by mining firm's hedging programs and the fact that the big Canadian companies' average cost of production is less than $300 an ounce.
``It's true that Barrick (Gold Corp (ABX.TO)) and Placer (Dome Inc (PDG.TO)) in Canada are low cost producers,'' said Placer Dome Inc spokesman, Hugh Leggett. ``Our cost is about $220 (an ounce) and Barrick's is I believe just under $200 (an ounce), so we still have a margin there.''
Barrick's chairman and chief executive Peter Munk said Barrick's gold hedging program has protected its profit margins. Barrick has sales of about 7.5 million ounces hedged at an average price of about $420 an ounce, while its cash operating costs remain under $200 an ounce.
``Barrick is fully protected with the largest hedge position and the lowest operating costs in the industry,'' Munk said in a statement on Monday.
Others in the industry cautioned, however, that prolonged weakness in the gold price, or any further falls, would take a toll on small and medium producers.
``In the event of a prolonged slump (in the gold price) you can say that in 1998 only one, or possibly two, of the senior producers will be making money,'' said Anthony Lesiak manager of investor relations at intermediate gold miner Greenstone Resources Ltd.``What happens if the gold price (goes to and) stays at $250 an ounce, what then?''
Lesiak said some of the bigger companies like Barrick have to carry other costs like the acquisition price for deposits such as the Pierina Pascua property in Peru. Those have to be added to the price of taking gold out of the ground.
The price of bullion plunged on Monday after the news that the Reserve Bank of Australia had sold 167 tonnes of gold reserves over the last six months.
Gold was fixed in London at $318.75 an ounce on Monday, its lowest level in 12 years in the midst of a bearish debate over whether central banks should continue to hang onto their large reserves of gold bullion.
Central banks in the Netherlands, Belgium and Switzerland also have sold off gold reserves in recent years and the U.S. Federal Reserve has issued a paper suggesting central banks have no need to hold gold.
Some analysts said the price of gold has dropped so low that nearly 60 percent of the world's gold miners are in the position of producing at a loss and some senior mining companies with mines in South Africa may have to shut down or suspend production.
Total world production in 1996 was 2,346 tonnes. Gold has lost more than 13 percent of its value so far this year as central banks reviewed the worth of holding reserves.
Some high-cost Canadian producers already had scaled back projects as a result of a lower gold price last year.
Royal Oak Mines (RYO.TO), whose first quarter cash cost of production stood around $372 an ounce will close its mine in Hope Brook, Newfoundland and write down reserves at its Colomac mine in the Northwest Territories, while TVX Gold Inc (TVX.TO) said in January that it was suspending operations at its Casa Berardi mine in Quebec.
The gold index on the Toronto Stock Exchange fell more than four percent by 325.31 points to 7529.89 near the close, led by a sharp fall in Franco-Nevada Mining Corp Ltd (FN.TO) by 4.90 to 62.00 a share and Franco's sister company Euro-Nevada Mining Corp Ltd (EN.TO) by 1.55 to 38.45 a share.
Barrick's shares fell 0.40 to 27.80 a share on the exchange on Monday, while Placer Dome shares slipped 1.20 to 19.25 a share. Royal Oak shares were down 0.21 to 2.65 a share, while TVX Gold shares slipped 0.45 to 6.30 a share. http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=1715983
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