You are here
Ted Butler: Changing course
By Steve James
Reuters
Tuesday, November 1, 2005
http://za.today.reuters.com/news/newsArticle.aspx?
type=businessNews&storyID=2005-11-
01T063422Z_01_ALL123699_RTRIDST_0_OZABS-MINERALS-GOLD-DEALS-
20051101.XML
NEW YORK -- A $9 billion deal that would create the world's largest
gold company could ignite a rush of takeovers, as smaller companies
struggle with high mining costs that eat into profit margins,
analysts and industry observers said on Monday.
"I expect this will continue as it's the best way for companies to
build up reserves, by buying other mining companies," said Peter
Schiff, chief executive of brokerage Euro Pacific Capital Inc. of
Newport Beach, California.
"I don't think this is the end of consolidation. Bigger companies
will buy juniors; it's easier to buy reserves on Wall Street," said
Schiff, who manages approximately $400 million of investments,
including 10 percent in gold mining stocks.
His comments came after Canada's Barrick Gold Corp. bid $9.2 billion
in cash and stock to acquire another Canadian miner, Placer Dome
Inc..
Successful completion would catapult Barrick -- already Canada's
biggest gold miner and the world's third largest -- ahead of Denver-
based Newmont Mining Corp. and South Africa's AngloGold Ashanti Ltd.
in world rankings. Placer is the world's No. 5.
The announcement comes at a time when the industry is struggling
with higher exploration and mining expenditures, brought on by sky-
high energy costs. Meanwhile, the gold price hit an 18-year high
around $480 per ounce earlier this month -- although it has slipped
since, with the spot price in New York down below $466 from Friday's
$473.
Asked if the Barrick-Placer Dome deal would spark a wave of
consolidation, Peter Spina, an industry observer who runs the
precious metals Web site Goldseek.com, said: "Absolutely.
"It's surprising there have not been more. I expect some other
bidders to come into the picture," he said. "Big companies are
looking to consolidate and there are not many big players."
Both AngloGold and Newmont declined to comment on whether they were
interested in Placer Dome or future acquisitions of smaller miners,
the so-called "juniors."
"Placer Dome has been a possible takeover target for some years; and
I don't know whether Newmont or AngloGold will get into a battle,
but there's certainly a possibility," said analyst David Davis at
Andisa Securities in Johannesburg.
"(But) Barrick will probably only keep the core assets it wants and
spin off the rest of them."
Before the deal was announced, Harmony Gold Mining Co. Ltd. Chief
Executive Bernard Swanepoel commented on mergers in general. "The
rate of depletion plus the rate of declassifying reserves back to
resources far outstrips the rate of discovery.
"For companies which all have to justify their share prices partly
through being growth stories, to me it sounds inevitable that
corporate activity will take place."
Goldseek.com's Spina said the rising cost of mining the Earth's gold
deposits was crucial. "Companies are forced to go after others to
build their resource base.
"If you look at the valuation of the juniors, they have been
devastated in the last two years." Their market valuations are down
as much as 90 percent, he said.
"Also, in the gold market, the price has gone up, but so have costs.
These companies have not been able to raise capital," said Spina. "I
believe in the next year when the price heats up, there will be more
interest. This market has more potential to the upside."
"Most companies have not invested as much in exploration as they
should because of (previously) low gold prices and the increased
cost of mining," said Euro Pacific's Schiff. "Prices need to rise
substantially, and in my mind will go a lot higher."
Schiff, who owns some $600,000 of Barrick stock and $300,000 of
Placer Dome shares, said he was talking about gold in the range of
$2,000-$4,000 per ounce.
Frank Holmes, chairman and CEO of U.S. Global Investors, said the
deal highlights mining companies combining to share costs. He cited
the recent friendly deal in Canada in which Inco Ltd. agreed to
acquire rival nickel miner Falconbridge Ltd..
"Already we are seeing several mining companies sharing heavy
equipment costs. Barrick could save $200 million, so there's
probably a lot of synergies," said Holmes, whose $2.6 billion mutual
fund in San Antonio, Texas, is approximately 20 percent invested in
gold and mining stocks.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
http://www.goldpennystocks.com/
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
http://www.buysilvernow.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
