Editorial Opportunities in gold

These are exciting times for gold miners. Since Sir Isaac Newton first established a fixed gold price back in 1717, gold has been synonymous with money, the standard against which all other currencies are measured. Now, although it has lost that official hallmark as the world’s benchmark currency, gold is in reality much more. Now it is a speculative commodity with unique features, one of those features being that it is perceived to be a much more reliable and consistent store of value than paper currencies. In effect, gold is better than money.

What’s more, as a commodity to be mined, gold is one of the few consistently profitable metals. Nickel miners are doing fine now, as are those that mine zinc, copper and lead. But much of the recent good fortune of these mining operations is due to their extensive efforts to cut costs and improve productivity. And no one pretends that the new-found prosperity of base metal miners is anything more than the predictable high of the business cycle, a cycle that most in the business recognize must continue to turn until metal prices are again at a low point. It’s a cycle that makes the years of plenty suffice for the years of plague.

Gold, on the other hand, hasn’t slipped below $300(US) an ounce for any significant length of time since the late 1970s. With the average opera ting costs of Canadian gold mines at about $210(US), there’s a lot of room for making money even at those worst of times. With gold averaging $447(US) in 1987 and bound to exceed $425 for 1988, it’s not hard to see why 80% of mineral exploration today is directed toward the precious metal.

Yet gold mining companies have changed in the way they market their product. Some still put their faith solely in the marketplace as gold miners have done for years. But more common today is a strategy of forward sales, gold loans, puts and calls designed to reduce the downside risk without surrendering the upside potential. An important position at many of today’s largest gold mining companies is the person who manipulates the multitude of today’s trading instruments so his company can withstand the shocks of an extremely volatile gold market yet still benefit if and when prices go up.

But these are exciting times for gold miners not just because times are good, but because the potential for growth is virtually unlimited. While gold languished at an artificial price until 1968, there were few developments in the world of gold mining. Today technology is catching up with gold mining — or rather gold mining is catching up with technology — and the phenomenal growth rates of companies like Placer Dome, American Barrick Resources, Lac Minerals and others can be traced to their ability to see the potential and grab it.

Heap leaching, carbon-in-pulp recovery, computer-assisted mine planning and even developments in theories about the origins of gold deposits have all had their impact in the 1980s and will continue to do so. Hemlo, Carlin, Papua New Guinea and many others owe their development to these changes. And there will be more.

The opportunity to break new ground and the potential for profit is a powerful combination. Those who succeed in the gold mining business today are those who can grab those opportunities while they can.