If you grow something it takes time, energy and a lot of effort. Not all connections will be apparent at the first sight - you need to know what you are doing. Those who are in this Gold Bull market from its very beginning, remember that Barrick was always among those "hedgers who was playing by the music of anti gold cartel." Situation has changed, when the company announced its unloading of its hedging and now it will enjoy the leverage to the gold price, but the real party will be going where resources are - in junior mining sector. In order to have more understanding of the next steps to realise value in this stage of this Bull we need to do some digging. We will refer you to couple of our old post, which are relevant today even more than before.
"4. First Gold will make new all-time high, second will be M&A play: Majors will shop for Juniors with resources in the ground. Here is the double-game - Gold is moving up and Majors' production and Reserve Base is going down. If you like more leverage you are welcome to Silver market. Place to be is in stories will strong management, growing resources and stable political situations. Markets will be volatile by all means and political tensions will be driving this Gold Bull as well."
"CS, Junior Mining economics, bullish case for Hard Assets, Gold and Silver.
Just few short months ago we all have been worrying that Argentina will default. If you consider the Junior mining companies share prices like MAi.to, CGH.to and TNR.v involved in Argentina - even today discounts show that Mr Market is still awaiting some kind of tsunami to cover all the goods in the ground by miles of water.
We know that there is a battle against that huge mine, but we will leave environment responsibility with Barrick Gold ABX and connect here a few important points in our Value Web.
Mining business is a very close and interconnected. Juniors are taking the risk to fund, find and develop resources, Majors are buying these resources and are ready to pay a top buck to buy the time."
"Blue sky is called blue sky because of its unlimitness, but the edge between the TenBagger and worthless dreams is very sharp and hurt a lot of people. First hole drilled with economic mineralisation normally brings excitement and flood of money compare to Junior's market Cap and average volume of trading - nobody really knows how big is that thing in the ground. Before that hole will make its way from our "3 of one Thousand" to boring and relatively safe producing mine, Junior Mining company drilled that hole will experience Investment Cycle we would like to write about today. We have discussed before Junior Mining economics and our Bullish case for the Real Things. There is no question for us that the big money will be made in the sector again, the big question is Where?"
Reuters:
By Jan Harvey
BERLIN
Mon Sep 27, 2010 4:11pm IST
BERLIN (Reuters) - Barrick Gold, the world's number one miner of the precious metal, said on Monday gold prices could "easily" outperform recent record highs to rise above $1,500 an ounce in the next year.
"From what we're hearing, there are still significant new buyers coming into the market," Jamie Sokalsky, the company's chief financial officer, told Reuters on the sidelines of the London Bullion Market Association here.
"My view is that we could see much stronger prices still from here," he said, adding: "I can see gold easily taking out new highs and going above $1,500 an ounce in the next year."
Spot gold rose to a record high of $1,300 an ounce on Monday. Delegates at the LBMA meet were bullish on prices earlier on Monday, delivering an average forecast of $1,406 an ounce for this time next year.
Sokalsky said compared with where gold was in the early 1980s, at around $2,300 an ounce on an inflation-adjusted basis, prices still had substantial upside.
"Given all the factors that are there to support gold -- macroeconomic factors, supply and demand factors, geopolitical tensions, a still-simmering sovereign debt crisis -- I think the ledger has so many more reasons to buy gold that to sell," he said.
He said the company's recent closure of its hedges -- forward sales of gold made to lock in prices of future production -- meant it now had greater leverage to the rising gold price.
DEMAND SOARS
Demand for gold has soared in recent years as the financial crisis boosted the precious metal's appeal as a haven from risk, while concerns quantitative easing may debase paper currencies have fueled buying of bullion as an alternative asset.
Supply has struggled to keep pace, with central bank selling, once a significant source of bullion to the market, falling off sharply and scrap supply erratic despite rising prices.
Sokalsky reiterated Barrick's output forecast of 7.6-8 million ounces for 2010, but said the company's $500 million Cortez Hills mine, which went into production in the first quarter of this year, was likely to outstrip its current production target.
"The first two quarters have been great quarters for the mine, so we expect to exceed that guidance of 1.1 million ounces...probably in the neighborhood of 5-10 percent," he said.
Barrick's cash costs for the year were likely to be at the upper end of its existing $425-455 an ounce guidance as rising gold prices increased royalty obligations, he added.
Nonetheless he said margins remain healthy. "We are seeing significant margin expansion," he said. "In the second quarter our margin against cash costs was over $700 per ounce."
He said when two projects currently under construction -- Pueblo Viejo in the Dominican Republic and Pascua-Lama on the Chile-Argentina border -- are in full production, they will contribute 1.5 million ounces a year for the first five years at cash costs below $200 per ounce.
"These are very good long-life projects that, once in operation, will look to lower our overall cost base," he said.
(Reporting by Jan Harvey; Editing by Sue Thomas)"
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