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Why would a gold-mining executive want low prices to continue? That's easy

By: Chris Powell, Secretary/Treasurer, GATA

 -- Published: Tuesday, 1 March 2016 | Print  | Disqus 

Dear Friend of GATA and Gold:

GATA's friend T.L. says he is confused about why the chief executive of a major gold-mining company -- that is, Randgold's Mark Bristow -- would tell Bloomberg News yesterday that a lower gold price would be good for the industry:

http://www.bloomberg.com/news/articles/2016-03-01/randgold-s-ceo-says-be...

Bloomberg quotes Bristow as noting that the longer that gold prices stay low, the more production will fall, thereby supporting prices over the longer term.

But additional inferences may be drawn. That is, Randgold has a few rich mines in Africa with low cash costs -- the company estimates them as being less than $700 per ounce -- and is comfortably profitable at current gold prices. As low prices push more marginal mines out of production, those mines become available for purchase by more profitable mining companies like Randgold at distress prices. If such marginal mines are indeed purchased at distress prices and the market eventually turns upward, as through the collapse of the latest round of gold price suppression by central banks, the acquiring mining companies will enjoy a windfall.

There would be nothing strange about such a strategy in the gold-mining business. Indeed, this was the strategy used by Barrick Gold in the 2000s when it was using gold leasing by central banks to hedge much of its production and, in doing so, even claiming to be the agent of central banks:

http://www.gata.org/node/1858

Barrick's heavy hedging drove the gold price down, making other gold miners unprofitable, and then Barrick bought two big competitors cheaply, Homestake Mining and Placer Dome.

Randgold also has been considering acquisitions lately --

http://www.ft.com/intl/cms/s/0/ac2a6296-ce75-11e5-92a1-c5e23ef99c77.html

-- and recently withdrew from a big one in Ghana after recalculating the likely profit. Any gold-mining company on the hunt for more assets certainly wouldn't want the market to move up before the hunt was complete, just as some gold investors, figuring that the market is starting to turn back up, lately have been hoping for one more smashing of the price by central banks so investors can establish a better entry position.

Of course for other gold investors, especially those who have suffered losses over the last four years, the turn back up can't come too soon. They shouldn't look to Bristow for sympathy, especially since, like many other gold-mining executives, he seems perfectly content with the rigging of the gold market by central banks.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

* * *

Join GATA here:

Mines and Money Asia
Tuesday-Thursday, April 5-7, 2016
Hong Kong Convention and Exhibition Centre
Hong Kong Special Administrative Region, China

http://asia.minesandmoney.com/

Mining Investment Asia
Wednesday-Friday, April 13-15, 2016
Marina Bay Sands, Singapore

http://www.mininginvestmentasia.com/

Support GATA by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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 -- Published: Tuesday, 1 March 2016 | E-Mail  | Print  | Source: GoldSeek.com

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