TORONTO, Dec. 17 /CNW/ - Even the recession could not keep the price of gold from maintaining its strong showing in 2009, holding a value over US$1,000 since early October. According to the annual PricewaterhouseCoopers (PwC) Gold Price Survey, the year saw an average upwards of US$959 with prices ranging between US$812 and peaking at over US$1,200 in early December.
In 2008, 44% of companies did not expect their production levels to change as a result of gold price volatility. This year however, after seeing a significant increase in reported production levels over 2008, companies seem to give more weight to the current and anticipated price of gold. Almost three quarters of respondents reported an expected increase in their long term production levels, and ninety-one percent of respondents expect gold prices to continue to rise in the next year.
Respondents indicated the average price used to determine reserves is US$764 compared to US$734 in 2008, and US$825 for asset carrying values compared with 2008's price of US$751.
"Gold price assumptions have been increasing steadily over the last few years, with the most significant increases occurring in 2009, says Bob Bosshard, a partner with PwC Canada's mining practice. "In fact, just over half of the companies (58%) plan to use the same prices over time (2008: 69%). But, of those planning to use variable prices over time, the average prices reported trend strongly downwards over the longer term."
According to the survey, companies use a number of different sources in determining their price estimates. Current price (45%), analysts' trends (38%) and historic price (16%) are the main factors considered in estimating gold prices. However, respondents indicated that dependability of estimates is one of their biggest concerns.
When it comes to financing, companies are more optimistic than last year. A majority of companies (83%) stated that financing would be more readily available going forward. Last year, 89% of respondents reported that financing would be more difficult to secure, likely due to the imminent credit crunch at that time.
The survey polled 58 of the leading gold mining companies and examines what gold price they have used to assess asset carrying values, the issues that influenced their choices and disclosure that is planned for their 2009 annual reports. For more information please visit www.pwc.com/ca/mining.
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