That being said, a broad definition can be useful. Proven, probable and possible categories, for example, are common. Geologic reserves and mineral inventory are categories that can also have their place, as long as everyone involved knows what is being referred to.
What we don’t need, however, are more variables to enter the picture. Gordon McCreary at Alfred Bunting & Co. points out a recent trend that can only add to the confusion, the practice of referring to grades in ounces of gold equivalent.
The problem with this approach is that the commodities measured in relation to gold can change value in relation to gold quickly and dramatically. If silver, for instance, is a large component of production, translating silver output into gold equivalent can be quite misleading.
“In a strong gold market, investment demand that slops over into the silver market is typically very buoyant for silver prices but, in a flat or down gold market, the absence of speculative demand in the face of the expected significant increase of newly mined silver would be rather depressing to the silver price,” says McCreary.
“The conclusion reached is that we must continue to be diligent in our analysis of equity investments in companies with projects which are highly exposed to silver prices but are obscured under the guise of gold equivalency.”
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