The chairman of one of North America’s largest and most successful gold mining companies, Peter Munk, says the industry is headed for a period of “consolidation, rationalization and upheaval” that will bring irreversible change.
“Conditions in the gold market are not going to improve,” he told shareholders at the annual meeting of American Barrick Resources (TSE) as the gold price continued to languish in the US$335-340-per-oz. range. “There is a new revival of confidence in the world … and I don’t believe that we at Barrick or in Canada … have the ability to change that.”
Munk said Barrick will benefit from industry consolidation by picking up high-quality assets left by its crumbling competitors.
“I welcome the stability (in the gold market),” he said.
“We will become a very, very profitable member of a much smaller but maybe much healthier industry.”
In 1991, Barrick earned US$92.4 million (US68 cents per share). In 1992, the company expects high-grade sulphide ore at the Goldstrike mine in Nevada to boost production to 1.2 million oz. and earnings to US$1 per share. Using the most sophisticated gold hedging program in the business, Barrick will be able to realize an average price of at least US$425 per oz. for the next three years. It is this earnings guarantee that will keep Barrick ahead of its competitors in the minds of institutional investors, Munk said.
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