Australasian Mining Review
Issue link: http://ebook.aprs.com.au/i/26056
36 worth approximately US$800 billion at today’s gold price and representing at least 11 per cent of global stock. This is equivalent to nearly half an ounce of gold ownership per capita, a figure which is significantly below consumption in western markets, representing scope for additional future growth. Significant cultural interest in gold, acquiring gold as a store of wealth and high domestic trade in jewellery are an integral part of life in China and the Middle East. Robert Zoellick, president of the World Bank, commented recently: “The soaring price of gold reflects the international unease about the strength of large developed economies”. He stated that, “Gold is now being viewed as an alternative monetary asset. It has become a reference point because holders of money see weak or uncertain growth prospects in all currencies. Gold is appealing to people who ask - where should I put my money? It is a hedge against uncertainty.” The pundits are projecting a rise in the US dollar gold price for the next year, with some seeing US$2,000 per ounce being achieved in 2011, driven by investment uncertainty, concern about rising inflation and a weakened US economy still staggering from the Global Financial Crisis of 2008. Realistically, all booms end. The commodity cycle is a regularly occurring event on a seven to 10 year cycle, with the last downturn prior to October 2008 being September 1997 continuing into 1998. However, fund managers in 2008 with less than 10 years’ experience had never encountered one before, yet we saw it happen before in September 1987 and in 1972 when the nickel boom of 1968-69 crashed. The commodity cycle is supply and demand driven, with interest rates a key component. Consistently rising interest rates creates expensive borrowings, cutting back borrowing for major construction projects such as supermarket complexes, dams, power stations, highways, tunnels and bridges. These construction projects are major consumption markets for resources commodities in metals (steel, copper, galvanizing zinc, aluminium, alloys) and non-metals (petroleum products, plastics, clay, cement and gravel). Lack of demand drives these commodity prices down, taking market sentiment for investment in the exploration and mining sector along with it. Gold is always partly affected by this, and will go down along with the other metals. Given that this cycle is 10 years, and the bottom was 2008, make sure you are out of the share market well prior to October 2018 because that will be the next recession. This always happens in September- October as this is the end of the financial year in Europe and bad results can no longer be hidden or disguised when the annual figures come out. So the gold price will continue to rise for a year, maybe two, until there is a boom run again, but interest in the gold sector will wane after two years as competing speculative buying opportunities arise in the next bubble. Depending on how the politics of carbon goes, these new bubbles will be carbon trading, carbon capture and storage, new battery technology to store electrons from renewable but intermittent energy sources such as wind, solar and tide, energy-efficient appliances and new electricity generating options. Speculators will bail out of exploration mining into these areas in late 2012 onwards to the next demise in 2018. Local gold explorers and miners are making their golden hay while the sun shines. The smaller stocks have the best potential for significant price jumps, so let’s look at some of those rather than the big guys. Greater Bendigo Gold Mines (ASX: GBM) has developed a new mineralisation model for its Inglewood Goldfield. The company has said a realistic near surface exploration target has been defined of two million tonnes for several deposits up to 50 meters deep, with grades ranging from 2g/t up to 5g/t. The new mineralisation model has a range of 160,000 to 300,000 ounces of gold in near surface deposits. It’s Goldquest work program was first looked at when the gold price was less than US$400 per ounce, and the low-grade mineralised haloes were considered sub-economic at the time. The current jump in gold prices and interest in the sector may make these halo areas more attractive. Eleckra Mines Limited (ASX: EKM) was listed on the ASX on 4 July 2006. The company owns 100 per cent of the Yamarna Gold Project, a sizeable tenement package totaling approximately 3,200km2 , covering the majority of the Yamarna greenstone belt 140km east of Laverton, Western Australia. The updated resource for the Yamarna Gold Project was announced on the ASX on 1 September 2008, totaling 749,000 ounces of gold (13.1 Mt at 1.78 g/t Au). In