FUNCHAL, MADEIRA (MINEWEB) – Only just over a couple of years ago gold mining company CEOs could seemingly do no wrong. The gold price was soaring to record levels, stock prices were mostly strong, shareholders mostly seemed happy, and the major funds which provided much of the companies’ support were calling for more and more growth.
The bandwagon was rolling, and the serious underlying problems which were already surfacing, such as hugely escalating capital costs for new projects, and ever ongoing sharp rises in operating costs were largely being ignored as they were being more than covered by the seemingly ever-rising gold price. The gold bulls were predicting ongoing gold price escalation and those who were suggesting caution were being ignored or ridiculed.
Oh what fun it was being a gold mining company CEO. Money was no object. Smaller companies were being absorbed while mega projects, which would make the execs’ names forever were entered into. As an example of what was occurring, Barrick’s huge Pascua Lama mine straddling the Chile/Argentina borders was going to be brought on stream at a mere $1.5 billion to be spent over 20 years – almost peanuts when the companies, and gold prices, were riding so high.
But the writing was already on the wall – perhaps back in 2007 before the initial market crash brought on by the Lehman Brothers collapse. Some new mega projects, such as the massive Galore Creek gold/copper project in northwest BC in Canada had already been stopped in their tracks as, in this particular case, mining major co-owner Teck had balked at the huge cost of developing the project which had risen from an estimated $2 billion to what then seemed to be an enormous $5 billion in a short couple of years. A very wise decision given what has happened since.
But nevertheless the industry overall seemed to take little notice seeing this as a mere blip in an ongoing mega-mine fest. Huge new development projects were entered into, smaller companies with what were then seen to be major projects in waiting, were swallowed up, often at substantial premiums to market prices – after all gold was seen as on an ever rising trend. Respected pundits were talking of $5,000 gold – even $10,000 gold was not seen as too way out.
The mining company CEOs, presumably supported by their boards and technical teams were spending, or at least committing, vast sums of money to support growth, or at least to maintain their high levels of gold production, like it was going out of fashion.
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