Gold supply declining, BlackRock manager says

Jan 10, 2014 @ 8:06 am

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BlackRock Inc.'s Evy Hambro, manager of its $8 billion World Mining Fund, said gold supply may fall “quite rapidly” as producers curb output at expensive mines.

“Very few gold companies are actually making significant profit,” Mr. Hambro said. “If this trend of better management of these assets continues, supply will start to decline quite rapidly.”

Producers are cutting costs and focusing on profitable mines after prices for the metal slid 28% last year, the biggest annual drop since 1981. Barrick Gold Corp., the largest by sales, sold three of its Australian mines last year and chief executive Jamie Sokalsky says it's in talks to offload more assets. Harmony Gold Mining Co. said it would lower expenses, partly by reducing equipment and exploration spending.

The industry must follow the example of diversified mining companies in cutting costs and allocating spending, Mr. Hambro said.

“The gold companies, and the management teams there, were the worst offenders in terms of value destruction,” he said. “They ticked every single box on what not to do. The lessons they could learn from the industrial players are quite real.”

The 30-member Philadelphia Stock Exchange Gold and Silver Index fell 49% last year as the U.S. economy improved and some investors lost faith in the metal as a store of value.

(Bloomberg News)

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