Reasons for Positive outlook on gold..(done by greater minds than my own - just a cut and paste)
After years in the investment wilderness, a combination of factors has brought investing in gold equities back in vogue.
Canada mining conference was a record 80-plus institutional clients. We have compiled what we thought are the prevailing trends in the industry.
Organic growth remains largely the domain of the mid-tier and intermediate gold producers. This reflects that it is easier to grow off smaller production bases. Companies reporting organic production growth included Agnico-Eagle, Glamis Gold, Meridian Gold, Cambior, Apollo Gold, and Repadre Capital. Among the seniors, Barrick Gold stated that it would generate 2 million ozs of new gold output over the next four years from four new mines. Newmont Mining highlighted a suite of development projects though absolute production forecasts were not released.
Industry consolidation remains a key mantra for the industry. Most companies stated a desire to grow through the acquisition of other producers and/or mining projects. Since the North American mid-tier producers remain expensively priced, the 8 or 9 senior producers around the world are likely targets for each other.
Exploration is on the rebound. Both Barrick Gold and Newmont Mining spoke about being industry leaders in the exploration field. Thanks to the new Alto Chicama discovery, Barrick has sharply increased exploration spending in 2002. Newmont highlighted it has over 100 drills turning at its various projects around the world. Mid-tier/intermediates with intriguing brown and greenfield projects include Agnico-Eagle, Meridian Gold, Goldcorp, Glamis Gold, Northgate, and Repadre.
Hedging on wane. Gold hedging remains anathema to most gold producers,especially among the key and unhedged mid-tier producers (GG, MDG, AGE and GLG). Even the senior producers are making moves to reduce hedging positions (both Barrick and Placer have cut back call option positions this year).
Strong free cash flow generation. This point was highlighted by many companies, a function of the higher gold price and dearth of new growth projects in 2002.
Revival in interest for junior/intermediate gold producers.