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Gold industry consolidation likely despite Barrick-Newmont merger collapse

  • Despite the collapse of the $33B Barrick-Newmont merger last month, scarcity and extraction costs would seem to make consolidation of the embattled gold mining sector inevitable, WSJ's Alistair McDonald and John Miller write.
  • The gold industry ramped up exploration as prices increased 6x from 2001 through 2012 to $1,750/oz., but prices since have tapered off to ~$1,300/oz.
  • Discoveries also have tapered off: 22 gold deposits with at least 2M oz. of gold each were discovered in 1995, there were six such discoveries in 2010, one in 2011, and zero in 2012.
  • The grade of gold held by miners declined 35% from 2001 to last year, and lower grades require digging up more earth to find the metal so are more expensive per ounce; the cost of mining an average oz. of gold rose to $745 in 2012 from $280 in 2005.
  • ETFs: GDX, GDXJ, NUGT, DUST, GLDX, JNUG, JDST, RING, GGGG, PSAU
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Comments (6)
  • Brian Bobbitt
    , contributor
    Comments (1905) | Send Message
     
    Despite all the news pro and con higher prices, I continue to see fundamental reasons for a continued weakness in the metals.
    To be more precise, I say prices are as near to a 'bottom' as one dare to declare. I put my reputation on the line at $26.26 and had my hat handed to me.
    This time, I firmly feel prices are very close or have seen the lowest we will see ever again.
    Go look at your monthly chart, going back before the big rise, and it appears, technologically speaking, that prices have settled in this area.
    I would be a buyer of silver eagles in here, or very high grade numismatics (IF YOU KNOW WHAT YOU ARE DOING).
    High grade means one of a kind, or with a population under 50.
    Otherwise, for now, I suppose GLD or SLV is okay. I don't have any of it. I consider an ounce of silver equal to a share of SLV. I will not be getting any more silver stocks or ETF's. Too many shenanigans possible. The Silver market itself, I'm pretty sure, is fixed, but at least with that, you can 'clink it' in your hand. Put it in a safe, and let the price move up.
    Capt. Brian
    The Lost Navigator
    19 May, 07:04 PM Reply Like
  • caribsurfking
    , contributor
    Comments (43) | Send Message
     
    To every pump, there is an equal and opposite dump!

     

    Newtons 2nd Law of Trading!
    19 May, 08:09 PM Reply Like
  • 6151621
    , contributor
    Comments (1174) | Send Message
     
    $745 for 2012?! That sounds like cash costs and this doesn't accurately reflect all costs of mining an oz.
    20 May, 08:38 AM Reply Like
  • mbaloun
    , contributor
    Comments (6) | Send Message
     
    I believe we will see one more bottom, which will happen when the market falls hard from these unsustainable highs due to quantative easing. The only reason the markets are so high now is because of the government stimulating the markets falsely and not getting the economy growing by adding real jobs and bringing down our rediculously high national debt. So when the market tanks everything tanks, including precious metals! Then after the metals stabilize, I'm guessing the $1000 an oz. The metals will then take off there and start a bull market in the metals that will eventually get to $25000 oz. This will happen because our country has too much debt and when the #### hits the fan EVERYONE will be running to the metals!
    20 May, 09:28 AM Reply Like
  • 6151621
    , contributor
    Comments (1174) | Send Message
     
    How much is a $1.50 Costco hot dog when gold goes from $1300 to $25000? Maybe $20?
    20 May, 09:33 AM Reply Like
  • jeffrey mac
    , contributor
    Comments (12) | Send Message
     
    if gold doubles then the hot dog would also double to 3 bucks....right? I'm gonna invest in gold AND hot dogs :)
    20 May, 01:32 PM Reply Like
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