Global Mining Companies Predict Gold Rush in 2011, PwC
OREANDA-NEWS. February 04, 2011. Despite the current strength in the price of gold, mining companies in Canada and globally are predicting high gold prices to continue throughout 2011, according to PwC’s 2010 Global Gold Price Survey Report, reported the press-centre of PwC.
Report’s key findings:
A majority of 82 percent of gold producers expect their forecasted production levels to increase.
Nearly 75 percent of gold mining companies expect the price of gold to continue to rise until Q4 2011. However, the current price of gold is still far below the high of 1980 in real terms.
Gold companies predict the price of gold will peak between USD 1,400 and USD 3,000, with 40 percent believing the price will peak around USD 1,500 when the survey was conducted in November 2010.
John Campbell, partner, mining and metals leader PwC comments on the situation:
“Given the high demand for gold, it will be interesting to see if companies that have smaller, higher cost deposits of gold will start up their production and move faster than they would under normal circumstances.”
The survey found 70 percent of gold producers plan on using their additional cash influx to look for new projects or expand existing ones to replace or replenish reserves. The top three strategies are organic brownfield exploration (78%), organic greenfield exploration (54%), and mergers and acquisitions (37%).
Michael Knoll, partner, head of M&A lead advisory, added:
“The number of mergers and acquisitions planned is in part explained by the correlation between the rising price of gold and the increase in deal activity. This year has seen a surge of mining deals take place, which was also a notable trend in 1980 when the price of gold was its highest.”
Concerns over embattled currencies, particularly the US dollar and Euro, are helping to drive the price of gold up. Large deficits and rising levels of debt have placed pressure on the traditionally strong global currencies. As a result, more countries may continue to turn to gold as a substitute to holding weakening foreign currencies. Resource-rich countries may increasingly look at gold investments to limit increases in the value of their currencies (and the related harmful effects on their non-resource industries) by expanding money supply to make such purchases. Non-resource based economies that are export-driven may adopt similar strategies since lower local currencies can help their exports remain competitive.
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