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Gold giants shrink to fit as Paulson pushes breakup

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Published : March 22nd, 2013
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Category : GoldWire

By Liezel Hill
Bloomberg News
Wednesday, March 20, 2013

The 10 biggest gold companies, led by Barrick Gold Corp., spent more than $100 billion in the past 20 years buying new mines and projects around the globe. Now they're feeling pressure to throw the strategy into reverse.

Gold Fields Ltd. spun off most of its South African assets in February. Billionaire hedge-fund investor John Paulson is calling for a breakup of Johannesburg-based AngloGold Ashanti Ltd. Barrick, which has 27 mines, is selling assets after an acquisition and cost overruns helped erase $27 billion of the Canadian company's market value.

A Bloomberg Index of 14 large gold miners has lost 27 percent in the past year, worse than the 7.2 percent drop in a similar gauge of global oil companies. The gold industry, which underperformed the metal for five of the last seven years, has tried to stop the slide by ending gold-price hedges, raising dividends, building mines, and, most recently, pledging spending discipline. Spinning off or selling assets may be its next option.


"The next fad is going to be the unbundling of the majors," said Mark Bristow, chief executive officer of Randgold Resources Ltd. The Jersey, Channel Islands-based company believes the optimal number of mines is "four or five, six at a push," he said.

Such moves would follow the example of international oil companies that have split up to unlock value. ConocoPhillips, the largest independent U.S. oil and natural gas producer, spun off its refining unit in May, less than a year after Houston-based Marathon Oil Corp. listed its refinery network as a separate company.

Shareholders have grown cold on further expansion as valuations in the industry declined. The ratio of the largest gold miners' enterprise value to their earnings before interest, tax, depreciation, and amortization dropped to 6.3, less than half the multiple at the end of 2010, data compiled by Bloomberg show.

The gold-mining strategy of bulking up was led by Barrick, which became the industry leader in 2006 when it bought Placer Dome Inc. for $10.2 billion. Now operating across four continents, Barrick saw the estimated cost of its Pascua Lama mine on the Argentina-Chile border more than double to as much as $8.5 billion and it took a $3 billion writedown on a Zambian copper mine last month.


Read more here

http://www.bloomberg.com/news/2013-03-20/gold-giants-shrink-to-fit-as-pa...



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Data and Statistics for these countries : Argentina | Canada | Chile | Jersey | All
Gold and Silver Prices for these countries : Argentina | Canada | Chile | Jersey | All
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Chris Powell is the secretary of the Gold Anti-Trust Action Committee (GATA) which has been organized to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities.
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"Shareholders have grown cold on further expansion as valuations in the industry declined."

Of course, but shareholder sentiment in NOT the reason for this decision. Drops in disposable income or perceived disposable income is the primary cause for this decision only.

If Joe Consumer's billfold is empty, he can't invest in anything. If Joe Consumer thinks there is a chance that what little he has left in his billfold might be the last, he won't invest in anything.

It takes a massive amount of investor dollars to build a large mine. The shareholders that matter can see the lack of available investment monies. Ergo, tighten up and shed black-holes. And then maybe we can ride this out.
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"Shareholders have grown cold on further expansion as valuations in the industry declined." Of course, but shareholder sentiment in NOT the reason for this decision. Drops in disposable income or perceived disposable income is the primary cause for this  Read more
overtheedge - 3/22/2013 at 5:59 PM GMT
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