Gold Rally Has Legs: Mining Industry Leaders Agree
Source: Marc Davis, BNW News (9/22/09)
Record high gold prices are here to stay, according to several of the world's most prominent gold mining industry executives. This was their emphatic proclamation at the Denver Gold Group's prestigious annual conference at the Grand Hyatt Hotel in Denver. . .
This was their emphatic proclamation at the Denver Gold Group's prestigious annual conference at the Grand Hyatt Hotel in Denver. And as if on cue, gold's performance gave plenty of credence to their bullish remarks. Having easily breached the psychologically all-important $1,000 an ounce mark the week prior to the conference, gold's spot price continued to gather momentum. Which, of course, delighted attendees at the world's most important annual congregation of gold mining and investment industry movers and shakers.
Among the power players who spoke enthusiastically about gold's future was Aaron Regent. He is the CEO of the world's largest gold miner, Barrick Gold (NYSE: ABX) (TSX: ABX), which is on track to produce 7.2–7.6 million ounces this year. In his popular presentation, he said the yellow metal will become increasingly attractive as a "safe haven" investment. Especially against a backdrop of a sluggish global economic recovery, the world's runaway money supply and looming inflationary forces.
He also said that such developments make it unlikely that gold's spot price will stumble badly again (as it did when it briefly topped $1,000 an ounce in March, 2008 before retracing its impressive gains all the way back to a low of $709 later that year).
"There are a number of factors supporting where the gold price is today. Certainly the economic environment is part of that…So, it's understandable why gold is where it is (at over $1,000 an ounce)," he reasoned.
As for gold's further upside potential, Regent was careful not to make any bold predictions but he did assert that its prospects are "very positive," especially as gold reverts back to its traditional role as an inverse proxy to the trend in the US dollar.
Charles Jeannes, the CEO of Goldcorp (NYSE: GG) (TSX: G), is like-minded in his outlook. His company is one of the world's several largest gold producers and is the fastest growing of them all. It has a projected output of 2.3 million ounces for 2009. Jeannes told a packed audience that continued inflationary fears and the prospect of an anemic US dollar "for quite some time to come" will continue to be potent drivers for gold prices.
"We're certainly in a rising price gold environment right now…And there's a lot of reasons to be bullish about gold prices going forward," he said.
He later told BNW News that he was not sure that $1,000 an ounce would immediately assert itself as a new support level for gold prices. But the fact that dark economic storm clouds are continuing to amass means that this lofty price level is poised to become a springboard for the metal's next up-leg, he suggested.
Meanwhile, former Goldcorp CEO Rob McEwen was far more explicit about what he expects gold will do next during his presentation as the CEO of US Gold (NYSE.A: UXG) (TSX: UXG). His high-flying gold exploration/development company is making impressive headway in its hunt for significant gold deposits in Nevada and world-class silver discoveries in Mexico.
"Gold is going a lot higher. By the end of 2010, we will see $2,000 an ounce gold. And by the time that the gold cycle is over we'll see $5,000 an ounce," he declared.
McEwen's steadfast views may seem hyperbolic to some. But when he speaks, everyone listens. That's because he is regarded as something of a legend in both the mining industry and the investment community, alike. His claim to fame is that he developed Goldcorp from a standing start with a market capitalization of about US $50 million to around $8.5 billion in a little over a dozen years. During this time (1992–2005), the company's share price appreciated as much as 3,130%.
The U.S. government is mismanaging its efforts to stimulate an economic recovery by way of setting the stage for hyperinflation and debasing the U.S. dollar in the process, according to McEwen. And that's why he believes that we are still in the early stages of an epic bull market for bullion.
Even the mid-tier to small gold producers at the conference had plenty to say about the noble metal's lustrous future. They include Joe Conway, CEO of mid-sized IAMGOLD (NYSE: IAG) (TSX: IMG), which is on target to produce around 910,000 to 920,000 ounces this year. IAMGOLD's share price has been a stellar performer since it bottomed out a year ago, reflecting the company's rising star in the gold sector.
"Absolutely $1,000 an ounce could be the new support level for gold," Conway told BNW News. "The massive financial stimulus seen in the U.S. and globally will have to lead to inflation, setting the stage for an even higher gold price."
Among the junior gold miners in attendance was Timmins Gold Corp (TSX.V: TMM), which is scheduled to become North America's next gold producer, commencing in December of this year.
Notably, Timmins Gold is in the enviable position of likely becoming the world's first ever gold miner to command a four-figure price for its inaugural gold bar. And with its projected mining costs at only $412 an ounce, 2010 promises to be a banner year as the company quickly ramps up its output to 80,000 ounces per annum.
Company CEO Bruce Bragagnolo is something of a contrarian in the sense that he believes we are entering into an era of deflation, which he expects to benefit gold prices.
"On the one hand, we may be headed for currency inflation due to North America's governments injecting massive amounts of money in the system," he said. "On the other hand, people are starting to save money, rather than continuing to be big consumers. And this is going to put the brakes on the economies of the world, which will lead to deflation. "
"But none of this matters for gold, which will maintain its value relative to other assets. And the profit margins for producers will even improve," he added. "But if instead we have inflation, then all the inflationary arguments will hold true for the price of gold."
Bragagnolo did, however, concur with fellow captains of the gold mining industry in the belief that $1,000 an ounce will prove to be a new support level for gold.
"This will be a new base for the next major upside movement in gold's price," he said.