Is gold on its final run for our money?Published by MAC on 2001-05-01
Is gold on its final run for our money?
But we can hazard one compelling conclusion from the reports, surveys and proposals which are represented here: the gold mining industry IS in crisis. Some of the proposals for propping it up (such as making new investments in downstream smelting and manufacture, or directly marketing gold coins and jewellery) may not be strategies of last resort, but they do indicate a floundering around in the effort to regain public confidence in gold.
The potential opposition of local communities is becoming more, not less, important to companies as they decide where to go, or even whether to go anywhere at all. As the costs of gaining access to deposits begin to mount along with the pressures to employ and train local workforces, and to build-in rehabilitation, compensation and "worst case scenario" costs, so do the corporate costs of mining.
This should mean that private investors in gold mining stocks, as opposed to speculators in metal trading, begin to lose confidence in certain countries or regions. The fortunes of those companies which have a smaller global "spread" than others, such as TVI in the Philippines and others limited to one or two areas, will suffer first. But - as the cash flow generated from gold begins to reduce - so even the bigger companies may not have the capacity to take on expensive expansions or enter new areas.
The key question may then become: will miners who withdraw from gold exploitation feel viable enough to remain in the areas they covet, searching for other minerals? Or will they be able to effectively diversify into other minerals, such as diamonds?
The terminal shaking of the "golden bough" does not in itself mean the mining industry will radically change.
Minewatch Asia Pacific Project, July 1999