Editorial Gold fever rages around the world

Gold fever, with the price of the yellow metal persisting at a relatively high level, is catching on these days pretty well all over the world.

Just in the last few weeks, reports of a gold rush have emerged from such widely-separated countries as Zimbabwe, Colombia and Indonesia. The latter two, in particular, are issuing glowing forecasts of greatly expanded gold production. Colombia for instance, which is already the world’s seventh largest gold producer, is expecting big things from the region of Guainia, said to be “on the verge of becoming a new Eldorado.” The Colombian government is going to be offering mining licences in the region for gold and other metals within the next year, and Jorge Bendeck, president of Colombia’s newly-formed state gold company, Sociedad Minera del Guainia, has said (with an optimism bordering on fantasy) “we could be looking at a photocopy of South Africa.”

To do that, in actual fact, Colombia’s Guiania region would have to be an Eldorado indeed. Colombia’s forecast gold production this year of 28 tonnes, while respectable enough, is dwarfed by the 655 tonnes expected from South Africa. And it’s a far, far cry from the 121 tonnes forecast from Canada, and 144 tonnes from the United States. (all the above estimates come from Shearson Lehman Brothers, London.)

Indonesia is just about as bullish as Colombia when it comes to its gold-producing hopes. There, an enthusiastic mines and energy minister, assuring his countrymen that Indonesia is “entering a golden era,” predicts that within a decade, or by 1997, that country will be producing 150 tonnes a year. Officially-reported production is now about three tonnes a year, so again it would seem that the fever induced by gold has had more than the normal effect on the imaginations of its proponents.

It would be folly, on the other hand, to suggest that there could not be and will not be great growth in gold production from countries such as these, so long as the price of gold remains high enough support it.

A mere six years ago, for instance, Australia produced just 18.4 tonnes of gold (in 1981), whereas this year it’s expected to produce 90 tonnes. Canada produced 52 tonnes in 1981, and now six years later will considerably more than double that, as noted above. The United States will go from 43 tonnes to 144 tonnes, in that same time period.

As Consolidated Gold Fields notes in its publication Gold 1987, no other gold-producing country in the world has been able to match the expansion in Canada, Australia and the U.S. And, it adds, the growth in these three countries has been greatly accelerated by technological advances, computer-assisted mine planning, and a wide range of innovative mine-financing schemes. Not the least of the latter, of course, has been the flow-through financing available in Canada for minerals exploration.

Certainly, it’s a profitable business moiling for gold these days, and the current pace of world exploration and production guarantees that there will not be a shortage of the yellow metal. It will be a happy situation if the present price simply holds. If, as some still predict, the price heads up into or even beyond the $1,000 per ounce range, then undoubtedly we’ll see the world’s gold fever turning into a full-scale stampede.