Why Buy Gold Stocks? Australia Gold

For profit and wealth protection. Gold mining companies have done extremely well over the past ten years and in particular since the 2008 credit crisis, commonly known as the Global Financial Crisis (GFC). Many investors have made well above average returns investing in gold mining companies and gold itself during this time. The opportunity has not passed because the underlying reasons that have caused this bull market have not been fixed.

But isn't gold just a useless pretty rock? Obviously not as Central Banks, wealthy investors and corporations have been buying gold right up to this date. Gold has proven to be an essential Central Bank asset as protection against currency fluctuations and to provide confidence in the banking system.

Since 1981 houses in Australia are up at least1700% (17 times) and yet gold is only up 47% since 1980 at the writing of this piece (13th September 2010) even though gold was at a record high in early 1980. Gold reached its low of US$252.45 in August 1999 making a second low at US254.35 during February 2001. I was there in 2001 investing in gold stocks and trying to highlight the opportunity to everybody around me. I eventually started work on GoldOz in early 2006 in frustration that few if any would listen.

I was also there in the second half of 2003 buying silver and again nobody would listen to me. It was under US$5 at the time. So how well have Australian gold stocks performed since then? Australia's largest gold company, Newcrest Mining Ltd, sold as low as A$3.00 in April 2001 and has reached A$40.50 in March 2008. That is a 1250% profit.

Oz Minerals Ltd, Bolnisi Gold Ltd, Kingsgate Consolidated and many other Australian gold stocks have done even better from low to high. Educated investors have made staggering profits in the last decade. Do you want to protect your wealth and/or make excellent investment gains over the duration of this gold bull market?

Did you watch the dot-com bubble? Most of the gains happened in the latter stages. Did you watch the last gold bull that ran from 1971 to 1980? Remember, gold was fixed at US$35 an ounce until 1971 and the Federal Reserve Chairman Paul Volcker was able to push interest rates to 21.5% to deal with inflation at that time. This measure is unavailable to Ben Bernanke who now faces the largest global debt bubble in recorded history.

The 70's Bull Run was abbreviated because of the gold fix (to 1971). The problems back then had been brewing for several years before 1971 and therefore if gold had not been fixed it would have been moving upwards strongly years earlier. Financial asset bull markets commonly run for about 20 years and then reverse for a similar amount of time. These counter cycles are when gold really shines. Financial analysis tells us this gold bull will run for the next 5 to 10 years taking this rallyout to a similar time frame. Will the gold stocks do as well or better in the last half of this (secular - long term) rally?

Gold stocks ran up the hardest producing unbelievable gains from the second half of the seventies. Many stocks rallied from under 50c to hundreds of dollars per share. Gold ran as hard as it did in the seventies due to a lack of faith, a lack of confidence in the financial markets of the time. This is just what we face now.

Ask yourself, do you think that debt creation can really cure a debt crisis? Clearly this is ridiculous - such measures can only buy time and makes the problem worse. This is exactly like giving $100,000 credit limit American Express card to a family that has maxed out their other credit cards, have a massive mortgage and expensive car payments that they cannot manage. It buys them time and makes their debt and eventual default even worse.

Of course, whole nations cannot go bankrupt but they can and do default and need restructuring. The turmoil this creates is on a much greater scale. Fortunately in the past this has been a rare occurrence however, unfortunately, now several countries face such a risk at the same time. All the fuss about Greece, Spain, Portugal, Ireland and Italy is only the beginning of this process. Japanese government debt is twice as bad as Greece and similar to some states of the USA.

Stimulus money has to come from somewhere – it has to be paid back. Government borrowing more money they don’t have to stimulate a sick economy creates more debt. This crisis will not go away quickly. The worst is yet to come. The best is yet to unfold for investors who buy gold, silver and the companies that mine them. The future Bolnisi Gold companies are now some of the juniors, developers and emerging producers.

Do you want in? Do you really trust governments and politicians? Will they bail you out or will they bail out themselves and the banks? Who will bail you out if they don’t? I will tell you – only you can protect yourself. As long as this debt crisis lasts gold will be bid, gold will rise. Selecting gold stocks that will produce the stellar gains seen in the second half of the 70’s gold boom is an art – luck will not suffice. The answer is to get information – the best you can get.

Get educated; we hope you can prosper during the difficult times ahead. Now you have to look at timing and that comes down to top down analysis or world events in financial markets.

Good trading / investing.

Source: Neil Charnock

Junior gold miners provide M&A allure - Australia Gold News

Investors seeking exposure to gold should back Australia's junior gold miners, which will be takeover targets for larger producers pushing to expand, analysts say.

The forecast wave of consolidation in the small end of the sector will likely see more Australian miners tie-up with offshore producers of the precious metal, Martin Place Securities research analyst Warren Kreyzig says.

"There is definitely a trend," Mr Kreyzig told AAP.

"Gold production is diversifying.

"It used to be South Africa, Australia and United States that were the big producers, and if you look now, it is more evenly spread among many countries.

"That trend is certainly taking Australian companies offshore.

"Australian companies in the future will have a lot more offshore operations than they do now."

Just this week, Perth's Avoca Resources Ltd unveiled a plan to merge with Turkey-focused, Colorado-headquartered Anatolia Minerals Development Ltd, while a bidding war between Canadian miners for Sydney-based Andean Resources Ltd was short lived.

Goldcorp Inc took pole position to take over Andean on Tuesday, when fellow Vancouver-based company Eldorado Gold Corporation pulled out.

Mr Kreyzig said Argentina-focused Andean was a perfect example of a prime takeover target for larger international gold miners, with its long-life, high quality ore bodies.

The larger miners were seeking projects with a mine life of about 30 years and were not interested in those expected to last less than 10 years, which described many of Australia's small gold mines, he said.

"It's not really in any of the larger players' interest to acquire any of those (smaller) projects unless they're thinking of amalgamating a few different operations perhaps into one," Mr Kreyzig said.

For junior gold miners, however, the acquisition of modest assets could be worthwhile as it had the added bonus of making a company harder to take over.

"For Avoca, their whole friendly merger is basically protection against a hostile takeover in the future," Mr Kreyzig said.

Citi's research division this week said Thailand-focused Kingsgate Consolidated Ltd was a potential takeover target, while Medusa Mining Ltd was set to hit the big league by 2015 with production of 400,000 ounces per annum (ozpa) from its operations in the Philippines.

But Mr Kreyzig was less convinced.

"Kingsgate will have to float their operations in Thailand onto the Thai stock exchange at some point in the not too distant future, so that's certainly a disincentive for any takeover," he said.

"And Medusa ... had very high grades initially, but they will tend to lower over time and that's the nature of the ore body."

Citi said several 100,000 to 200,000 ozpa Australian gold juniors would "scramble to build size and relevance" to fill the gap left by Lihir, a one million ozpa producer, following its $10.5 billion takeover by Newcrest Mining Ltd.

The transaction increased Newcrest's dominance of the Australian gold sector with the addition of Lihir's long-life assets.

Citi said Newcrest was 10 times larger than Australia's next biggest producer, Pacific Rim-focused OceanaGold Corporation, which produced about 280,000 ozpa against almost three million ozpa from an enlarged Newcrest.

"With the emergence of the small cap sector and the consolidation at the big end of town, there is a massive void in the mid-cap gold space in Australia.

"We see the need for a company to replicate LGL (Lihir) and believe that many of the Australian gold juniors have their eyes on the space.

"With the quality of their resource bases, none of the companies are likely to get there through organic growth in the next few years (Medusa possibly excluded).

"Thus we believe that M&A (merger and acquisition) activity is likely to continue in the Australian gold space."

Most analysts say there is strong outlook for the gold price, which is currently hovering around the $US1,250 per ounce mark, down slightly from the all-time high of $US1,265 in late June.

Surging investment demand would continue to be driven by concern about currencies, with the US considering quantitative easing, while global supply would stay tight as existing mine production declined and was replaced by fewer discoveries, Mr Kreyzig said.

However, gold sector consultants Surbiton Associates recently painted a buoyant picture for Australian gold output in the September quarter, when several operations are slated to pour first gold.

At the big end of town, Newmont Mining Corporation's massive Boddington mine in Western Australia continues to ramp up, while AngloGold Ashanti Ltd is expected to complete a feasibility study on its 410,000 ozpa Tropicana project, also in WA, in the December quarter.

See SMH Article

High price puts recycled mines into the bullion rush AUSTRALIA GOLD

LOCAL gold producers are matching bumper gold prices to bumper production, output for the June quarter rising to its highest level in 6½ years and topping $3 billion at spot prices.

The latest production survey by the Melbourne industry consultants Surbiton Associates, published yesterday, said June quarter output rose 11 per cent or 6.5 tonnes to 67 tonnes (2.15 million ounces) compared with the preceding March quarter.

Surbiton said the June quarter tally took output for the June year to 245 tonnes (7.87 million ounces) - an increase of 10 per cent on the 222 tonnes produced last year but still well short of the all-time record output of 318 tonnes in 1998.

A Surbiton director, Sandra Close, said the June quarter production was the highest since December 2003 and helped to turn around annual production.

Dr Close said the increase was the result of three factors. Several long-established producers significantly increased output in the quarter, there was increased production from mines in the ramp-up phase and several new and recycled operations started production.

"It's impossible to predict the future but the production outlook is positive in the near term," Dr Close said. "Some producers are still in the ramp-up phase and there are several other operations that are due to pour their first gold in the September quarter," she said.

Dr Close said that higher gold prices were one reason for the many new and recycled operations starting. Another factor was greater availability of finance after the the global financial crisis. "We are experiencing an extended period of high Australian gold prices which has led to old deposits being re-evaluated and redeveloped," she said. Between 2000 and 2005 Australian gold prices averaged about $550 an ounce but the average for the last two years was $1200 an ounce, she said.

''It's no wonder that we are seeing renewed activity in the gold sector.''

The top five mines were: the Super Pit with 200,000 ounces (Newmont/Barrick); Telfer, 188,875ounces (Newcrest); Boddington, 184,000 ounces (Newmont); Cadia Hill, 120,037 ounces (Newcrest); and St Ives, 117,479 ounces (Gold Fields).

See article

Perth Reports Gold Coin Sellout - Australia Gold

The Perth Mint reported May 12 that its bullion sales are “on a golden run” with the sellout of the 30,000 mintage of its 1-ounce Year of the Tiger gold bullion coin.

The popular release is one of eight gold bullion coins released as part of the 2010 Australian Lunar Coin Series II. Offering buyers a choice of eight sizes from 1/20-ounce to a huge 10 kilos, each gold coin portrays a design of a tiger’s head.

Interest in the annual Australian Lunar Series II has been very strong since it was launched in 2008, according to the mint. Both the 2008 1-ounce Year of the Mouse and 2009 1-ounce Year of the Ox gold bullion coins also sold their full 30,000 mintages.

“That’s a lot of gold!” said Ron Currie, sales and marketing director. “Like other mints, we benefitted from the dramatic pick-up in gold bullion during the world financial crisis. Since then our objective has been to maintain sales at a much higher level than pre-WFC. We’ve had a close look at our production and international distribution strategy with the result that we’re now much better placed to satisfy demand.”

The Perth Mint recently announced that it had taken a 100 percent interest in Australia’s only gold refinery, it would be complementing its secure storage hub for bullion in the U.S. with a new facility in Europe and that it has plans for a new online distribution channel.

Resource profits tax threatens birthplace of the gold rush

THE Rudd government's proposed mining tax threatens to halt planned expansions around Coolgardie, the birthplace of West Australian goldmining, according to the manager of the only working mine still in the town.
Peter Williams, chief operating officer at Focus Minerals, says the company has big plans for its Three Mile Hill operations, just outside the town of 1500 people where the first WA gold rush began 118 years ago.

But not if the resource super-profits tax comes in. "There are projects we're looking at that will only be viable because of current high gold prices -- those certainly wouldn't go ahead with the uncertainty of the new tax, or if it was introduced in its current form," Mr Williams said.

"Until we find out what the implications of this are, we won't be starting any new projects."

According to a recent KPMG study, the implications for the gold industry are dire.

In a study commissioned by the Minerals Council of Australia, KPMG modelled the effect of the tax on a typical new project.

The study shows those planned gold projects that have operating costs in the most expensive three-quarters of the industry become economically unviable.

Mr Williams said Focus, which recently spent $20 million upgrading its Coolgardie mill and has plans to spend $12m on a drilling program to help it expand, would be hit hard by the tax. "We certainly wouldn't be expanding the way we are planning to," he said.

Gold was found in Coolgardie in 1892, sparking a gold rush -- the centre became Kalgoorlie, 38km to the west.

Mr Williams said the uncertainty over the tax was already starting to affect exploration in the West Australian goldfields region. "We are finding it easier to get drill rigs than we did a month ago," he said.

"There is a bit of a downturn in exploration -- people are holding their breath and waiting to see what is going to become of this."

Like most small miners, Mr Williams sees little appeal in the RSPT's proposal to refund 40 per cent of failed projects.

"Very few projects actually collapse because it is rare those that are marginal enough to do so are approved," he said.

Source: http://www.theaustralian.com.au/business/mining-energy/resource-profits-tax-threatens-birthplace-of-the-gold-rush/story-e6frg9do-1225874745729