TORONTO (miningweekly.com) – As gold continues to beat consensus forecasts, analysts will have to change their assumptions, and equities in producers will then likely climb, Barrick Gold CEO Aaron Regent said on Wednesday.

The biggest factor holding back the share prices of bullion miners was the belief that gold would retreat in the future, but analysts had got it horribly wrong over the past couple of years, he commented.

“As price levels are sustained, assumptions are changed,” Regent said in an address to investors broadcast over the Internet, pointing out that the consensus gold price estimate had risen by 56% since 2009.

The gold price, meanwhile, has gained nearly 80% since the start of 2009, to trade at around $1 815/oz on Wednesday.

Regent went on to show that the forward curve of the yellow metal showed that it should increase in price, not decrease, as analysts expected.

“If you take $1 950/oz, which is based on the forward curve price to 2015, and you compare it to the consensus long-term price of $1 200/oz, there’s a $750/oz difference in that price assumption,” he noted.

“That basically means our earnings are going to be different, depending which assumption you use, by about $4-billion-plus after tax.”

Barrick, the world's biggest gold miner, could post pre-tax earnings of $11-billion this year if current metal prices hold, according to a subsequent speech by CFO Jamie Sokalsky.

Ultimately, share prices of gold producers will pick up, Regent said.

“If gold remains at these levels or increases, it’s likely a recalibration will take place, and we do think that gold equities will respond. The question is, will gold prices stay at these levels? And we think that there’s a strong case that they will,” he said.

The reasons he gave included emerging market growth and burgeoning demand for the precious metal in India and China, which now account for half of global gold consumption, the fact that central banks have again become net purchasers of bullion, and that miners are struggling to lift production.

“We, as an industry, are working hard to stand still,” Regent commented.

Another major reason for him to believe prices would continue to rise was the devaluation of currencies in the developed world, and investors seeking to protect their wealth against inflation in emerging economies.

REKO DIQ

Regent also gave an update on Barrick’s big joint venture Reko Diq copper-gold project in Pakistan, where the owners have suffered delays and threats from government officials that the asset would be taken from them.

He said that a recent court case in Pakistan had ruled that the province of Balochistan was authorised to issue a new mining licence to the joint venture company, which Barrick owns equally with London-listed Antofagasta.

“We have submitted our applications, and we’re expecting to hear back relatively shortly. We don’t know whether that’s next week, a month from now, but we’re basically waiting to hear back from the government of Balochistan,” said Regent.

Following this, the partners would “regroup” and determine their criteria to move the $3.3-billion project forward.

Barrick and Antofagasta’s joint venture company, called Tethyan Copper, owns 75% of Reko Diq, with the Balochistan government owning the rest.

Barrick's share of annual production in the first five years was estimated at around 100 000 oz of gold and 150-million to 160-million pounds of copper and the project has total measured and indicated resources of more than 25-million ounces of gold and 31-billion pounds of copper.

NEW DISCOVERIES

Earlier in the day, the gold giant announced that it had made two new “significant” discoveries in Nevada.

The two finds, dubbed Red Hill and Goldrush, are located six kilometers south-east of Barrick’s Cortez Hills mine and 24 km south-east of the Pipeline mine.

At Red Hill, Barrick had defined a 3.5-million-ounce inferred resource, the firm said in a statement.

Shares in the company closed 1% higher on the TSX at C$53.71 apiece.
 

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