The top gold mining executives in the world predict that cost pressures will continue into the following year, adding to the industry’s already existing headwinds from supply-chain disruptions, rising interest rates, and political and economic unpredictability.
Everyone in attendance at this week’s Denver Gold Forum agreed that the current economic climate is exceptional. A hawkish US central bank’s efforts to fight inflation have turbocharged the dollar and lowered bullion prices, which are a problem for gold producers. Gold-related stocks have fallen in value and gold prices are under pressure. A measure of gold firms has decreased 23% this year, behind the precious metal’s 8.9% slump.Mark Bristow, CEO of Barrick Gold, remarked at the Colorado conference, “We find ourselves living in exciting times as the world economies and geopolitical climate hit another inflection point. It’s possible that Second World 2 was the last time humans experienced such uncertainty.
The 34th annual Denver Gold Forum concludes on Wednesday, just as the US Federal Reserve announced another 75 basis point rate hike to control inflation.
The level at which gold stocks and prices are trading makes investors at the Colorado conference in private admit they are depressed, but they also acknowledge that the near-term picture is still difficult due to a higher dollar.
The Covid-19 pandemic’s ripple effects and the repercussions of Russia’s war in Ukraine are major factors in the decades-high inflation rate, and a disrupted global supply chain has increased cost pressures for businesses and consumers. Top mining executives predict that these problems will persist as long as the Fed keeps tightening money supply aggressively.
CEO of Newmont Tom Palmer stated in an interview that the current economic climate is “extremely volatile.” “Look out the window: you see the catastrophe unfolding in Ukraine, rising interest rates, and inflation. The subject extends beyond only the gold business.
Palmer, who is in charge of the biggest gold mine in the world, predicts that labor, fuel, and energy prices would rise “through the better part of 2023.”
Mining businesses and their operations face rising costs all over the world.
According to CEO Chris Griffith, Gold Fields has been battling with high labor costs that are increasing expenditures in Australia, where the business has nine active mines. While he has observed a decline in gasoline prices, other essential mining supplies, such as explosives and reagents, have yet to decrease due to continuous inflation.
Despite the fact that it has been leveling out, Griffith stated in an interview that “we’ll probably still have inflation at high levels for a significant length of time.”
In an effort to reduce inflation, the Fed has been aggressively tightening monetary policy, which has increased bond yields and the value of the dollar. Similar hawkish policies are being pursued by central banks worldwide. According to Shaun Usmar, CEO of Triple Flag Precious Metals, such moves can make it difficult for single-asset producers and development companies that might not have the financing resources to cover expenditures and raise money.
Usmar stated in an interview that “those companies have seen stock prices come down a lot.” “It’s unlikely that the equity markets are accessible; if they are, doing so would be exceedingly costly and dilutive. If they can get it, debt is quite expensive and is currently increasing more expensive.
Usmar, who held the position of Barrick’s CFO from 2014 to 2016, stated that such a climate allows for mergers and consolidation, particularly for miners with capital and a need for expansion.
Liquidity, he continued, “is the strongest risk mitigator for any mining company.”