Majority of gold producers poised for growth in production levels: PwC
TORONTO, Dec. 17 /CNW/ - Despite the current strength in the price of
gold, mining companies in Canada and globally are predicting high gold
prices to continue throughout 2011, according to PwC's 2010 Global Gold Price Survey Report released today.
Report's key findings:
A majority of 82 percent of gold producers expect their forecasted
production levels to increase.
Nearly 75 percent of gold mining companies expect the price of gold to
continue to rise until Q4 2011. However, the current price of gold is
still far below the high of 1980 in real terms.
Gold companies predict the price of gold will peak between US$1,400 and
US$3,000, with 40 percent believing the price will peak around US$1,500
when the survey was conducted in November 2010.
"Given the high demand for gold, it will be interesting to see if
companies that have located marginal deposits of gold will kick-start
their production and move faster than they would under normal
circumstances," says John Gravelle, Canadian mining leader, PwC.
The survey found 70 percent of gold producers plan on using their
additional cash influx to look for new projects or expand existing ones
to replace or replenish reserves. The top three strategies are organic
brownfield exploration (78%), organic greenfield exploration (54%), and
mergers and acquisitions (37%).
"The number of mergers and acquisitions planned is in part explained by
the correlation between the rising price of gold and the increase in
deal activity," says Gravelle. "This year has seen a surge of mining
deals take place, which was also a notable trend in 1980 when the price
of gold was its highest."
Concerns over embattled currencies, particularly the US dollar and Euro,
are helping to drive the price of gold up. Large deficits and rising
levels of debt have placed pressure on the traditionally strong global
currencies. As a result, more countries may continue to turn to gold as
a substitute to holding weakening foreign currencies. Resource-rich
countries may increasingly look at gold investments to limit increases
in the value of their currencies (and the related harmful effects on
their non-resource industries) by expanding money supply to make such
purchases. Non-resource based economies that are export-driven may
adopt similar strategies since lower local currencies can help their
exports remain competitive.
Gold price hedging continues to be unpopular among gold companies. While
the survey shows 26 percent of companies hold derivative or forward
sales contracts to lock in the price of gold, up from 22 percent in
2009, 64 percent of companies that have these agreements are required
to do so as an explicit condition of financing.
The high price of gold and positive outlook for 2011 is limiting the
desire in the market to undertake hedging activity as evidenced by
companies such as Barrick Gold, AngloGold Ashanti, and Resolute Mining
that eliminated their hedge books in 2010.
For more information or to download the Global Gold Price Survey Report 2010, visit: www.pwc.com/ca/goldpricesurvey.
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For further information: For further information:
Jessica Draker, PwC
Tel: 416 869 8723
Kiran Chauhan, PwC
Tel: 416 947 8983