THE COST of Gold Mining has risen so fast, any drop in the gold price would risk forcing new deposits to go un-mined, says a leading mining-stock fund manager.
"For most [new Gold Mining ] deposits discovered today," says Evy Hambro – managing director of the Blackrock Gold & General investment fund – "they're not being found in low-risk locations, so you need quite a high rate of return to justify making that investment. "
Calling $1000 per ounce the "break-even" price for most existing Gold Mining output, "You need a Gold Price not that far away from where it was 6 to 8 weeks ago [at record Dollar highs above $1550]" to reward new projects, says Hambro, speaking to UK fund supermarket and advisory group Hargreaves Lansdowne.
"So we're very comfortable with Gold Prices at their current level...The point at which [the price] would be very well supported because Gold Mining supply would be turned off isn't very far away."
Gold Mining costs rose 17% per ounce in 2010, says analysis from London's GFMS consultancy, while so-called "all in" costs – including capital expenditure and overheads – rose by 20% to $857 per ounce. Add the cost of local infrastructure such as schools, hospitals and roads as often required by new Gold Mining licenses today, and the "true long-term cost of gold mine production" may have reached $950 for new projects as early as 2009, according to GFMS Mine Economics managing director Mark Fellows.
Currently holding £2.9 billion across 89 shares in the Gold Mining and related sectors, Evy Hambro's Blackrock Gold & General presently receives an "elite" four-star ranking from MorningStar, the fund analysis service. It has doubled in value for its investors since July 2006.
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