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Falling gold mine production will support prices
Source: BI-ME , Author: BI-ME staff
Posted: Sat May 2, 2009 12:35 am
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INTERNATIONAL. Global mine production of gold will continue to decline in the face of rising demand, and with less new supply there will be no gold price declines, the CEO of the world's biggest gold miner said. 

“The gold industry needs to replace almost 100 million ounces of reserves per year, and clearly this has not been happening,” Aaron Regent, CEO of Barrick Gold told the company's annual shareholders meeting in Toronto.

Regent says that gold mine supply actually has been on a downward trend since 2001.

Global gold mine production contracted almost 1.5% last year to 2,353 metric tons, according to Barclays Capital.

GFMS sees a further 2% mining decline to 2,302 metric tons in 2009. Gold scrap supplies probably exceeded 500 metric tons in the first quarter, about the same as global mine production, GFMS said.

Scrap supplies will be “much lower” in the second quarter unless prices rise “aggressively,” GFMS Chairman Philip Klapwijk said this week in Zurich. Scrapping will expand this year after jumping 27% to a record 1,218 tons in 2008 as higher prices encouraged sales, GFMS said this month.

“We had a perfect storm for scrapping in the first quarter” because of distressed selling for economic reasons and inventory disposals by some jewelers, Klapwijk said in an interview after the presentation. “We need much higher prices to sustain that rate of scrapping.

Barrick said first-quarter profit fell 28% as costs rose and prices for the precious metal declined.

Net income dropped to US$371 million, or 42 cents a share, from US$514 million, or 58 cents, a year earlier, Toronto-based Barrick said in a statement. Excluding certain items, profit was 34 cents a share

Barrick produced 1.76 million ounces of gold in the first quarter at a total cash cost of US$484 an ounce, up from US$395 a year earlier. Fourth-quarter output was 2.11 million ounces at costs of US$471.

“The fact that it is getting harder to finance gold mines, it is clearly more difficult to find, permit and build the mines—they are more expensive and it takes longer—means that supply is likely to decline more than people think,” Barrick CFO Jamie Sokalsky said.

Regent, appointed CEO in January, is seeking to boost output from the company’s mines and reduce production costs as investors seek the precious metal as a haven from economic turmoil.

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