Quite possible that DCN going into hibernation mode due to cost base increase maybe a harbinger on what is to hit the world wide gold sector in the coming quarters. So long as gold price does not increase substantially or oil and gas price remain high or go even higher, some gold producers with previously high ASIC (those above A$1,700/oz), high hedging (@ $2,600/oz) and no cash reserve will be those that may report no profit or negative cashflow or be forced into hibernation as DCN for the coming quarters.
If the above happens, then there is a strong likelihood that world wide gold production will have to be cut back and if so there may be a supply squeeze in which case gold price will have to rise substantially. This coming quarter and the Sept qtr reporting will be interesting. I suspect that if gold price does not rise soon, then supply squeeze will force it to rise towards the end of the year.
There are gold pundits who projected gold price to hit US$2,500-$3,000 by year end. If the above holds true, I think the price range is reasonable. Also anytime gold price hit the $2,100 mark and stays there, momentum gold traders may start to pile in, driving the gold price to go higher.
If that is the case (lots of IFs here!!) then perhaps DCN mining on a smaller scale and optimised operations (DCN operated and not on contract as suggested by the management) can resume?
Just my two cents worth of musing and opinion and hope the above may bring out some hope and dispel some of the doom and gloom. I had my bout of emotional roller coaster ride(all down!
) yesterday.
Cheers.
