Mining Companies See Continued Gold Price Hike After 2010

Lucas Gilmore, “Big 4″ observer
December 19, 2010 /

Pricewaterhouse Coopers disclosed in its survey released today that majority of mining companies have high expectations of a continued gold rush at the turn of 2011 as financial concerns, PwC said, will drive price increase of gold.

Of the 44 mining companies that expressed upbeat in the price hike of gold next year, 82 percent said their gold production scheme would continue rising while 75 percent could see the price hike until fourth quarter of 2011.

In the same survey conducted by PwC November this year, mining companies said the price of gold would play between US$1, 400 to US$3, 000 per ounce, with a majority of 40 percent said the price would close at US$1, 500 per ounce.

Australia’s mid-tier mining companies in particular have managed a 25 percent increase in their combined revenue, from $8.5 billion in the last fiscal year to $11.3 billion for the year ended June 2010 based on a report released as well by PwC. Tim Goldsmith, PwC’s global mining leader, said it was an unexpected feat for the mid-tier miners given the impact of the economic crisis on the global community.

Searching for and expanding to new business ventures with increased cash flow would be used to fill in insufficiencies in their reserves, the report said, citing 70 percent of the mining companies. Among the strategies that the surveyed mining companies said they would employ are organic brownfield exploration (78 percent), organic greenfield exploration (54 percent), and mergers and acquisitions (37 percent).

On Friday, gold price closed at US$1378.60 an ounce based on the data from Comex division of the New York Mercantile Exchange, gaining 0.6 percent.

Mining companies have already started slowing down their hedging strategy following the positive outlook on the price of gold next year, with 26 percent locking the derivative or forward sales of gold 22 percent higher than in 2009.


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