Gold exports are likely to set a new record, according to Carlos Gálvez, the president of the gold committee at the mining and energy producers association.
Gálvez said that the industry was clearly doing well and that this was largely due to the country's advantageous geology (ie, large, easily accessible deposits of gold ore which can be worked by opencast methods) and mining knowhow. Gálvez said that the big question mark was against the country's political outlook, though he said that the appointment of Beatriz Merino as prime minister was an encouraging sign.
Gálvez added that the industry had a ringside seat on the political issues, since it had dealings with most of the 25 regional presidents, who are mostly from the opposition, over projects. There are mining projects in 22 of the 25 regions, Gálvez said.
Exports. Gálvez reckoned that gold exports this year would bring in about US$1.8bn. Gold prices have been strong this year and some gold analysts argue that prices are likely to go higher. The metal has traded at between US$340 and US$370 for most of the year.
Gold prices have been underpinned by a change in gold hedging strategy by some of the big goldmining companies. They have stopped taking out gold loans to finance new mines. In these deals mining companies effectively borrowed gold from the world's central banks, sold it for cash to develop the mine and repaid the gold loan with the production from the new mine.
The mining companies also used their goldmining business to drive a financial trading business based on betting on the gold price. A lot of these complicated bets came unstuck when the gold price suddenly spiked in 2000. Goldmining companies that had been betting on a stable or lower gold price and were effectively short of the metal, had to cover and take significant losses. This halted a lot of the speculation of gold.
Deflation. What is odd is that the gold price has been strong at a time when inflationary pressures in the world appear to have evaporated. Japan has been through a period of deflation and Europe may yet this year. In the US there is little sign of the usual surge out of a recession.
In Latin America prices are falling in the two biggest economies, Mexico and Brazil.
Yet the gold price has been strong. The obvious reason for this is that a substantial body of investors want to hedge themselves against the danger that the central banks have miscalculated and cut interest rates too aggressively and thus unwittingly stoked up inflation.
Also when interest rates and yield are this low, the cost (in terms of not getting a dividend or coupon) of holding gold falls.
Investment. Although Peru is a promising area for the gold industry, investment in the country has been steady rather than spectacular. The big project is Alto Chicama. This is still in an early phase and is unlikely to move into the construction phases until 2005.
Gálvez argued that Peru's tight environmental laws and system of consultation with the communities, which would be affected by new projects, means that new mines take time to get started. New projects have to produce environmental impact statements.
Regional governments. Gálvez said that the regional governments play an important role in the development of new mines. He said that they become, effectively, strategic partners with the developers. He argued that the regional presidents were keen on developing successful projects to deliver extra revenues to their communities.
End of preview - This article contains approximately 1082 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
