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AngloGold CEO sees industry consolidation yielding to deals with juniors

Section: Daily Dispatches

By Sprott Gold & Precious Metals Fund
Business Report, South Africa
Sunday, May 2, 2004
www.busrep.co.za/index.php?fSectionId=&fArticleId=422083

1. Global currency debasement. The US dollar is
fundamentally and technically very weak and could
fall dramatically. However, other countries are very
reluctant to see their currencies appreciate and are
resisting the fall of the dollar. We should therefore
see tangibles rise significantly in price, particularly
gold.

2. Growing gap between mine supply and demand.
Gold mine supply is about 2,500 tons a year and
demand has exceeded this by a considerable
margin for a number of years.

3. Low interest rates discourage hedging. With low
rates, there is not sufficient contango (when the
future is higher than the spot) to create higher prices
in the out years. Therefore there is little incentive to
hedge. Gold producers are not only not hedging,
they are reducing their existing hedge positions.

4. Central banks are more reluctant to provide gold
to the market. The banks have supplied too much via
the leasing mechanism. Far Eastern central banks
are also rumoured to be buyers of gold to diversify
away from the dollar. top.

5. Rising geopolitical tensions. Deteriorating
conditions in the Middle East, the US occupation of
Iraq and the nuclear ambitions of North Korea headline
the geopolitical issues. A fearful public has a
tendency to gravitate toward gold.

6. Limited size of the gold market. All the physical
gold in existence is worth more than $1 trillion (6.9
trillion rand), while the value of all the publicly traded
gold firms in the world is less than $100 billion. When
the fundamentals encourage a strong flow of capital
toward gold and gold equities, the trillions upon trillions
worth of paper money could propel both to
unfathomably high levels.

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