Wednesday 13 February 2013

FT Gold Miners in Search of Richer Seams - Rob McEwen Interview

FT coverage (below) of the issues ailing the gold miners.
Rhymes with Brent Cook. Miners looking for better grade, perhaps smaller, deposits. Looking to new frontiers while balancing risk and cash returns to share-holders.

However it is also worth considering Cohen's call to the miners to focus on gold as their functional currency, holding above ground reserves like ETFs - HERE

Rob McEwen discusses this practice and more in a recent interview HERE

Companies delaying development projects and focusing less on production targets and more on cash generation to appease investors as executives acknowledge the need to right past mistakes.

“The gold industry in South Africa and worldwide is going to be characterised by tightening supply, project deferrals and further curtailment of high-cost production,” says Nick Holland, chief executive of Gold Fields.

“In past, the philosophy was ‘let’s increase the ounces, let’s go for the marginal ounce’ . . . I think we got that wrong because . . . that marginal ounce cost you a lot more than you thought it was going to cost.”

companies have gone wrong in the past by stacking up capital projects “so what you see is capital expenditure spike which blows the balance sheet”.

“Gone are the days when people said ‘big is beautiful’, it’s more a case of what is delivering true returns to our shareholders,” Mr Venkatakrishnan says. “You are likely to see more partnering with other companies as they go into larger projects and you will start to see people putting more rigour into their project planning and delivery.”

Companies also complain that they face spiralling costs and lower quality ore bodies, while untapped or unexplored reserves tend to be in more esoteric emerging markets that can be more challenging to operate in. The global trend towards resources nationalism, with governments looking to reap more benefits from their natural resources through measures including high taxes or greater state intervention, has also added to costs and uncertainty.

But Mr Holland says miners will have to look to newer frontiers for exploration, including the Philippines, Latin America and Africa – Gold Fields is exploring in Ethiopia for the first time.

“We are going to focus on smaller but higher-grade deposits,” he says.

“What Gold Fields might be in five years’ time, we might be a company with maybe 15 mines producing 3.5m ounces, previously we were eight mines producing 3.5m ounces.”

http://www.ft.com/cms/s/0/a9362184-7440-11e2-80a7-00144feabdc0.html#ixzz2KjmO2yUT