Gold sector looks for more positive direction for rest of 2012

first_imgAustralia’s gold sector will meet in conference in Perth this week in a show of strength to seek consensus on the precious metal’s short-term future. But charting any forecasts beyond that period, conference organisers say, is fraught with difficulty as the sector – now predominantly dehedged because of the strong gold price of the past two years – remains captive to ongoing uncertain global equities markets.“Gold entered the current June quarter at around $1,650/oz. That represents some price easing since the end of 2011, it is down on the highs of in excess of $1,900/oz in September last year, and is some $500 or so an ounce short of some analysts’ predictions of a 2012 price potential exceeding $2,200/oz,” Conference Convenor, Bill Repard, said.“What we need to value against this equities market uncertainty is that the softening in the gold price has not been at a level to disincentivise gold mine development in higher cost Australian gold plays,” Repard said.“If anything, it has racheted up the merger and acquisition activity as local and international miners and investors seek a more entrenched gold exposure.“A challenge for the sector, however, is the conundrum it faces of the development and mining opportunity that the higher price allows because less economic deposits can be developed – versus the highly liquid global equities markets where investment caution in gold is the name of the game.”Gold’s challenges at domestic and international level will dominate the two day 2012 Paydirt Australian Gold Conference to be held in Perth next Wednesday and Thursday (April 18-19) at the Pan Pacific Hotel. More than 200 delegates have registered, including international financiers, brokers and analysts.“It is apparent that the Australian gold industry remains uncertain on how 2012 is likely to evolve,” Repard said.“The junior end of the gold spectrum is adopting a conservative approach in both corporate strategy and cash spend while the major players, while being better cashed up, are facing dwindling gold inventories,” he said.“On the key issue of price, the general consensus appears to be more of a holding pattern at current or slightly better levels for the rest of 2012, without the big rises evident of 2011 though reports this week do not rule out a plus $2,000/oz scenario within 12 months.“The positive take from all of these options is that there is no expectation of a major price collapse.“Therefore that widespread price belief should provide some steadying of confidence in the sector.“Delegates will be looking to reinforce that view of confidence as the reality is that there has been an underperformance of gold mining equities against price in recent years.”Repard said delegates would also seek to address the issue of the slow pace of new and major greenfields gold discoveries with substantial gains in exploration investment in recent years but little variation in gold’s global output annually of around 2,700 t/y.Key speakers will include Westpac Institutional Bank’s Executive Director, Global Head of Natural Resources, Patrick Cocquerel, and WA Chamber of Mines and Energy Director, Damian Callachor.last_img read more