Gold Miner Requirement - U.S.$3,000 Gold Price Within 5 Years!

By: Ian Campbell | Tue, May 22, 2012
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Why Read: Because it puts current escalating mining capital and operating costs into a somewhat different perspective, and arguably escalated concern.

Featured Article: A recent article reported that Aram Shishmanian, CEO of the World Gold Council has said that the physical gold price will need to reach U.S.$3,000 per ounce within five years "for the industry to stay profitable" - this in circumstances where gold miners 'currently needed a gold price of U.S.$1,300 per ounce to survive". Mr. Shishmanian is also reported as saying this required gold price increase has to do not only with escalating costs, but also the:

He also is reported as saying "If this continues for the next five years the gold price needs to be at least $3,000 per ounce (for gold miners) just to stay in the business".

Finally, Mr. Shishmanian is reported to have said he was optimistic sustained demand would drive prices higher over the long term as future demand would come from emerging markets, central banks and investors. In particular he seems to believe "emerging markets are going to hold increasing amounts of gold reserves (as) holding billions of dollars doesn't help them. The alternative potentially is gold".

Commentary: United Kingdom based World Gold Council, with operations in the Far East, India, and the United States, is a non-profit organization of twenty-two of the world's leading gold mining companies. Collectively those companies generate approximately 60% of the world's corporate gold production. Mr. Shishmanian is a former head of Accenture's global financial markets practice. Accenture is a global management consulting, technology services and outsourcing company. Information summarized from Wikipedia.

Given the World Gold Council descriptor and Mr. Shishmanian's background it seems implausible that Mr. Shishmanian:

Stated more directly, in order for Mr. Shishmanian to make the statements attributed to him, he and the gold mining executives and companies he indirectly represents must be strongly of the mind that the price of physical gold will trend higher from current levels. Otherwise:

Gold miners need $3 000/oz price in five years - gold council
Source: Mining Weekly (from Reuters), May 15, 2012
Reading time: 2 minutes, thinking time much longer



Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Business Transition Simplified

Through his website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world economic and financial markets influences on those two topics. A recognized business valuation and transition authority, he founded Toronto based Campbell Valuation Partners Limited (1976). He currently is working to bring his business valuation and transition experience to both business owners and their advisors in our new economic, business and financial markets normal.

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