1. Yamana Gold (AUY) is investigating the sale of pyrite and sulphuric acid from its gold and copper Chapada Mine. What is pyrite you may ask? Pyrite is that shiny metallic mineral popularly known as fool's gold.
2. Some encouraging news from the World Gold Council. Most recent statistics indicate that gold demand grew last quarter not just in value terms, but more importantly, in tonnage terms. While total demand in dollar terms rose 22 percent, volumes of gold sold edged up 4 percent at the same time to 831.7 metric tons.
"The absence of the extreme volatility of early 2006 increased gold's appeal, said council spokesman George Milling-Stanley. 'It's not the absolute price gold reaches,' he said. 'It's how it gets there. A volatile price makes consumers all over the world hang back.'"
I consider this to be a very important piece of news. Even though the next upleg in gold is likely to be primarily currency related, we must not forget that physical/jewelry demand has been the bread and butter of the Gold bull, accounting for 70 to 80% of the total demand. It's very good to know that physical buyers have adjusted themselves to the higher prices.
3. Dehedging is all the rage lately. First Barrick and now DROOY affiliate Emperor Mines has unwound its hedge book.
4. Miramar ("Arctic Gold") reported intriguing drilling results at its Hope Bay project in Canada, with several drill holes returning visible gold. MNG is up over 8% so far in the day.
5. Moody's revises Newmont's (NEM) credit outlook to negative from stable, citing costs and cap ex.
5 comments:
Careful. Barrick still has 9.5 mm hedged in $300's. If you read carefully they say they covered the "corporate" hedges, and if you look in the fine print of the Feb presentation you'll find there is 9.5 mm oz of "project hedges" remaining. My guess is there WERE NOT and ARE NOT showing the losses on that hedge on their income statement, and instead are adding the losses to the project costs.
You are correct. And what contributed to Barrick's elimination of its Corporate Gold Sales Contract hedges was the fact that in 2006, they "reallocated" 3.0 million ounces from that program to their Project Gold Sales Contracts (p.8 of 2006 Annual Report). I didn't look closely enough to check how the project hedges are being treated.
It's funny how many times the word "hedge" appears in their annual report. It took me 15 minutes just to scroll through all the references to "hedge".
Still, only about 7 to 8% of ABX's reserves are now sold forward, down from about 29% in 2001.
(http://www.barrick.com/Default.aspx?SectionID=3d0bb017-f3c8-4eee-bb79-e0e4211566bf&LanguageId=1).
The funny thijng for Barrick would be if now Gold prices crashed... that would be ironic.
Re: “While total demand in dollar terms rose 22 percent, volumes of gold sold edged up 4 percent at the same time to 831.7 metric tons.”
A “Federal Reserve Note” is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as consisting of 1/42.2222 fine troy ounces of gold.
Before 2001 any hedging would have been profitable because gold prices were falling since the 1980 peak.
I'm curious when any significant gold mining companies will announce a return to hedging as gold prices climb higher and higher. I'm guessing we'll see some announcements as gold approaches $850.
Of course eventually, gold prices will sky rocket so high, that it will be pretty tempting to hedge. It will be interesting how the market reacts then if some companies announce hedging programs at say, $1500 gold.
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