Gold Rush, or Flush?

Posted by Bull Bear Trader | 4/02/2008 08:50:00 AM | , , | 0 comments »

At the same time gold prices fall below $900 (off 10% in a few weeks), Newmont Mining is reporting that it plans to spend nearly $250 million on exploration this year - and the increase is not just because gold is commanding a high price. Apparently there has been a shrinking number of gold finds above five million ounces, a key number to make a mine worth the trouble, or at least produce better margins. About 4 percent of reserves meet this benchmark. Apparently Newmont is depleting its reserves at 10 ounces a minute, but needs a replacement of 14 ounces a minute (I assume to keep up with supply and maintain reserve capacity). Currently, Newmont has about 86 million ounces of gold in reserve. In comparison, Barrick Gold Corp held about 124 million ounces in reserve, as of last year. Like other industries, commodity prices (i.e., energy), are increasing the cost of production.

Tickers: NEM, ABX