-- Posted Friday, 4 May 2007 | Digg This Article
AngloGold reported this morning and as we had hoped, they showed some aggressive reductions to their hedge position by nearly 600,000 ounces in the past quarter. Overall gold production in the quarter was down 10% compared to the previous quarter while operating costs rose higher than had been expected. This all combined to send the company to a worse reporting quarter than expected by analysts. While making no exact commitments, AngloGold did state that they would continue to manage down their hedge book throughout the year.
Harmony, Gold Fields, AngloGold, Barrick and Newmont have all now reported and shown that costs are rising while production, quarter-over-quarter, is continuing to drop. The key for production forecasts will be the senior companies ability to bring new projects online and under budget over the coming year while continuing to prudently manage their flagship, but rapidly ageing, producing properties. It's our belief that mining doesn't operate in a vacuum and we just don't see new projects being brought online in a timely manner while production holds steady.
Mitsui Metals released their report on the hedge market today and it shows a total hedge position reduction of 3.9 million ounces, pushing the total market hedge position at present to 36.9 million ounces. This is down from a peak of 118 million ounces in 2001. They stated that dehedging will come in significantly higher in 2007 than had previously been expected.
There seems to be some confusion in the market at present about mining supply. It all depends on whose statistics you use. CPM group pegs annual mine supply between 62-65 million ounces a year. GFMS pegs it closer to 73-75 million ounces a year. I'm not sure what the discrepancy is from, but using the much higher GFMS statistics, mine supply hasn't done anything but trend down the last five years, and that isn't expected to change anytime soon. I'm checking into what the 10 million ounce disconnect is between the two analyst groups so that I can have a better understanding of why one set of data might show a supply increase while the other is showing the opposite.
Non-Farm payrolls are just out and have put the dollar under some pressure as the report has come in just below estimated levels at 88,0000 new jobs vs. and expected 100,000, showing some renewed pressure to new hiring in the economy.
It looks like yesterday's London close is turning out to be the catalyst the market needed in order to start off and challenge the $700 level. We're already jumping again this morning and be sure to keep an eye on the activity post-London close.
I'll send out an update later today when we have some figures in on how the new Royal Canadian Mint coins are selling on the first day out the gate.
Blanchard and Company, Inc. is the largest and most respected retailer of American rare coins and precious metals in the United States, serving more than 450,000 people with expert consultation and assistance in the acquisition of American numismatic rarities and gold, silver and platinum bullion. The Blanchard Economic Research Unit is a key source of precious metals market analysis and continues to be an important resource for financial and consumer media throughout the United States. Blanchard and its predecessor companies have called the New Orleans area home for more than 30 years. For more information about the company, visit BlanchardGold.com or call the company toll free at 1-800-880-4653.
-- Posted Friday, 4 May 2007 | Digg This Article
