Commodities bloodbath ‘nothing to fear,’ mining tycoons say – by Lisa Wright (Toronto Star – May 17, 2011)

Lisa Wright is a business reporter with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion. This article was originally published May 17, 2011.

The recent slide in metals prices — make that a slaughter in silver — has been pretty hard to stomach for the stampede of investors who have taken a shine to the gritty mining industry lately. But Peter Munk, Ian Telfer and Bob Gallagher aren’t reaching for the Rolaids.

Nor are they the least bit bearish after two rocky weeks that saw silver plummet by 35 per cent, gold dip under the $1,500 U.S. per ounce watermark and a sharp pull back in construction-friendly base metals from aluminum to zinc.

Many investors are squeamish after the gut-wrenching correction which dragged once-soaring silver squarely into bear market territory. (A 20 per cent decline from a market high is the unofficial definition of a bear market.)

In fact ‘poor man’s gold’, as it’s known, suffered its biggest four-day decline in 28 years earlier this month after hitting a peak of $48.70 U.S. in April. Silver slid another $1.85 again Monday, closing at $34.35 in London.

But this trio of Canadian mining tycoons has been in the business since they were cubs, and they don’t flinch easily. And if the latest slide has proven anything, it’s that what goes up must inevitably come down.

The guys at the helm of giants Barrick Gold Corp., Goldcorp Inc. and New Gold Inc. — who are also in the silver scene since it’s often mined in tandem with bullion — have seen more than their fair share of ups and down in the cyclical mining world.

Munk, the flamboyant founder and chairman of Barrick Gold Corp., is the elder statesman of the industry. He was just starting Barrick back in 1983 when silver was weathering its last big tailspin and gold was worth less than one quarter of its current value.

In an interview after the Bloomberg Canada Economic Summit last week in Toronto, he shrugged off the sell-off in precious metals.

“It’s a bubble. Bubbles collapse,” he said.

“I think it’s trading issues, the day traders. Sell and buy, that’s what they do . . . Do I think it will come back? I think it will. It depends how people feel.”

The 83-year-old entrepreneur and philanthropist was more philosophical about gold’s role in the global economy when he spoke to the business audience.

“Since 2000, I would consider it the age of uncertainty. There was 9-11 and confidence slowly eroded as currencies collapsed. Then the banks collapsed. So it’s no wonder that people looked around and the only thing that was there was gold. It’s the traditional safe haven.

“Gold stepped into that breach.”

Gallagher, the chief executive of Vancouver’s intermediate gold and silver miner New Gold, has a ‘been there, done that’ attitude to the mayhem in the metals market.

“I’ve been in the mining game more years than I care to mention and have been through at least three cycles of highs and lows in commodity markets, and seen dips and dives in metal prices along the way. Gold’s been on a roll for going on eight years now and has been through minor corrections and profit along the way, just as we’ve seen in the past weeks.

“Nothing to panic about: silver had shot up to the stratosphere and a significant correction was not surprising. The strengthening of the U.S. dollar two weeks ago, with the European Central Bank’s announcement that it would not raise interest rates, also contributed to the declines.

“But nothing significant has really changed in the underlying fundamentals that are going to continue to support high gold and silver prices. The U.S. is not going to resolve the issue of its huge debt and resulting U.S. dollar weakness and continued precious metals buying by central banks will continue. Meanwhile gold producers will continue struggling to maintain production rates at current levels while enjoying high prices.

“And I don’t see the fundamentals driving increasing prices changing soon. Gold is going to continue to climb above $1500 and it would not surprise me to see $1600 before the end of the year.”

Telfer, the 65-year-old chairman of Goldcorp who recently vacated his seat on the New Gold board, didn’t see anything to worry about either.

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