Georgetown: As the price of gold on the international market stand below US$1200, the Guyana Gold Board (GGB) confirmed that gold is projected to fall short of its declaration target for 2014.
In a release to the media, the GGB said that total gold declaration as at December 20, has decreased by 22.61 per cent when compared to 2013, while gold purchased by the GGB has decreased by 41.24 per cent for the same period.
In 2013, the gold industry declared a total of 481,087 ounces of gold which represented a 9.7 per cent increase over the previous year’s figure.
This, according to the GGB, was a historic performance – the highest level of production, exceeding the production levels of Omai Gold Mines when it was at its peak.
The GGB said the quantity of gold dealers exported has increased by 10.16 per cent, while the quantity of gold exported by the GGB fell by 40.26 per cent.
Thus, the overall quantity of gold exported for the two periods being compared are down by 22.73 per cent.
Additionally, the value of gold exported by dealers has increased by 10.86 per cent, while the revenue garnered by the GGB decreased by 43.48 per cent during the comparative periods. The total revenue for the two comparative time periods fell by 23.45 per cent.
Major factors
The release said that one of the “major factors for these lower levels of declarations are as a result of the fall in the global price for the yellow metal on the world economy during this year.”
It was noted that in 2013, it was forecasted that gold might fall to $1050 an ounce before this downturn is over and as predicted the precious metal “duly fell by a quarter in 2013, when compared to its highest level in 2011 and has made little headway in 2014, despite lots of geopolitical uncertainty. The sentiment is bearish and miners are being forced to curtail production or shelve investment plans.”
It was also noted that gold stocks have “suffered a miserable few years, becoming a laughingstock even among contrarians. However, this despised sector’s seemingly-endless downward spiral has left gold stocks vastly undervalued relative to gold, which drives their profits.
“The fundamentally-absurd disconnect between gold-stock price levels and gold can’t last. And it sure looks ready to end; making 2015 the year gold stocks shine again.”
At present, mining costs are largely determined by the particular deposit being mined, and are largely fixed when any mine is designed and constructed.
Hence, gold miners’ profits are almost totally dependent on the price of gold. The higher it is, the larger their margins grow since their costs generally don’t change much.
“This dynamic is what has long made gold stocks attractive to investors, when the gold price rallies, the profits of gold miners rocket higher much faster.
“If a miner can produce gold for $900 an ounce, and sell it for $1200, his profits are $300. But, if gold merely climbs 25 per cent higher to $1500, that same miner’s profits double to $600. This inherent profits leverage to gold makes the gold stocks really amplify gold’s moves,” said the release.
Sharp decline
Gold exports for the 2013 fiscal year amounted to US$648.5 million, a 9.5 per cent decline compared to 2012. The sharp decline was linked to the average price of US$1344 per ounce compared to US$1575 in 2012, negating the six per cent increase in export volume, which amounted to 482,527 ounces.
Guyana Gold and Diamond Miners Association (GGDMA) President Patrick Harding had told Guyana Times that the incessant decreases do not augur well for the development of Guyana’s economy and the Gross Domestic Product (GDP).
Harding related that miners were now contemplating abandoning shop and venturing into other sectors. This move was not limited to small miners.
The GGDMA President said the gold prices have not hit rock bottom and can drop even further if investors’ confidence continues to drop given recent activity on the international market.
He predicted had predicted that from the current state of affairs, Guyana’s gold production may drop some 10 to 15 per cent.
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