A fairly downbeat presentation on gold mining stocks from Blackrock executives at Mines & Money London.
LONDON (MINEWEB) – A gloomy morning in London was not uplifted for gold mining stock investors by a decidedly downbeat update on the sector from Blackrock’s Evy Hambro and Catherine Raw. They were speaking to a packed hall on the first main day of this year’s Mines & Money event.
Perhaps the only positive comment on the sector from those running what is probably the world’s biggest gold mining investment fund, Blackrock Gold & General, was that after many years of underperforming the gold price, the stock index beta is now once again following gold more closely – perhaps small comfort to those who have seen gold stock investment decimated over the past two to three years, with the gold price itself at the lowest level for around five years.
One has to add though that the previous speaker, Peter Boockvar of the US’s Lindsey Group, was more positive on current prospects for the gold price pointing to the continuing scale of central bank money printing, despite the US Fed’s withdrawal; the Fed’s worries about dollar strength impacting the US economy; the symbolism of the Swiss gold referendum, despite the ultimate low vote, the loosening of import restrictions by the Indian government and with his comment that demand for physical gold is off the charts. He predicted that the gold price has bottomed – but warned that he also said that a year ago too!
But back to Evy Hambro’s update since his last Mines & Money presentation two years ago. He commented that the gold mining sector faces huge challenges with cash flows for most having fallen dramatically, which means that there are ongoing strictures on the sector in repaying the vast debt levels built up when they were being pushed into, in retrospect, debilitating hugely expensive new mine developments and expansion programmes. They also dropped grades which was part of the reason for the ever ongoing cost pressures they found themselves under when the gold price started falling three years ago.
Some of the cost pressures have indeed been addressed and there have been non-core asset sales to try and mitigate some of the debt problems, although given that some have been at low valuations which may provide some great opportunities for perhaps more flexible junior and mid-tier purchasers, they will probably not have helped much in terms of debt reductions.
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