Brent Cook discusses recent actions by some of the senior producers
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Yes it is Take a look at the situation concerning AdameraMinerals and KinRoss.
Sorry about the spelling.
A few observations…
1. the write downs, which reflect the revision to perceived value (at the lower gold quote), can get reversed. A higher gold quote, downstream, will correct a lot of things in a hurry.
The mining industry is somewhat unique in this way. Often times, if a company is on the ropes, there is little if any hope of recovery. But in the mining space, a bull market in the price of the underlying metal can turn a marginal company into a particularly profitable one.
2. The situation is self correcting, to a point. To the extent that the production can not come on, in an environment of weaker gold prices, the supply is impacted (which will be a positive force on prices downstream).
Interesting point Relic
For a major mining company to increase its profitability, we need either a gold price increase, or a decrease in costs; i.e. a depression.
Given that I believe the US is going slowly into a monetary collapse (a mini-Wiemar style inflation), I believe the way to maximize profits from mining companies is investment in companies which are increasing resources. It is a bonus, if the company has a small existing production base with which to finance operations increasing resources.
However full portfolio diversification is more important during these times.