Lucky for us MON has plenty of reserves in place and...

Lucky for us MON has plenty of reserves in place and building.

From Sydney Morning Herald

Perfect storm for gold as mines left empty
Ambrose Evans-Pritchard
November 17, 2007

THE era of "peak gold" has arrived.

Try as they might, miners cannot find enough ore at viable costs to replace their fast-depleting reserves, even if they dig kilometres into the the Earth.

"There's not much gold out there," said Gregory Wilkins, chief executive of the producer Barrick Gold.

"Global mine supply is going to decrease at a much faster rate than people generally believe. Many of the new mines that people are anticipating will never come into production," he told the RBC Capital Markets gold conference in London.

"There is a great disparity between the money spent on exploration and success. It's hard to say where the price of gold is going, because we're in uncharted waters. I would say it could easily move to $US900 ($1008), $US1000, or beyond. It could happen very quickly. .

"We know from the US Academy of Sciences that some 26 per cent of all the copper and 19 per cent of all the zinc that ever existed in the Earth's crust has already been lost to mankind, mostly wasted in milling or smelting or buried in landfills."

Data has never been collected for gold, and the 5 billion ounces mined over history is still around. Roughly 1 billion ounces are in central bank vaults. But the same patterns of exhaustion are emerging.

South Africa's output is down to the lowest since 1932. Much of what remains elsewhere is locked up in no-go countries run by demagogues or serial expropriators.

"You don't put yourself in harm's way," Mr Wilkins said. "It's a non-starter to invest in a country that takes your mine away from you.

"The list of countries where we won't go is getting longer. There's Venezuela, and all the countries in Latin America that are influenced by [President Hugo] Chavez. In Ecuador they withdraw licences after they have been issued: you can't tolerate that kind of instability. Russia is another country where things are deteriorating."

The chief executive of Goldcorp, Kevin McArthur, said his group would not set foot outside North America. "We won't build a mine where we won't go on holiday. We're even tending to stay out of the US because that has some of the highest political risk in terms of mining investment."

The gripe is that revisions to the 1872 Mine Act will add royalty costs and allow regulators to shut down projects on a whim.

Mr McArthur said global output was on a relentless slide. "We'll see four-digit gold. It will have to reach $US2500 an ounce to equal the 1980 record in today's terms, so we have a long way to go."

Gold reached a 27-year high of $US846 an ounce early this month following rate cuts by the US Federal Reserve, although it has fallen back on profit taking.

Investors seem to be betting on a "Bernanke reflation", suspecting that the Fed will turn the liquidity tap back on to cushion the US property slump.

The chairman of RBC Capital Markets, Tony Fell, said the world money supply had been growing by 5 to 10 per cent while the stock of mined gold had been rising at 1.6 per cent, creating a mismatch that must be covered.

Mr Fell said the total debt burden in the US had exploded to 340 per cent of GDP, in stark contrast to the steady levels of about 150 per cent of the postwar era.

It almost insures further dollar debasement. "We're in the very early phases of a prolonged bull market," he said.

RBC argues that the global dollar system known as Bretton Woods II is "coming apart at the seams" as Asian, Middle Eastern, and Latin American states start to break their dollar links to avoid importing US inflation. The result is to resurrect gold, which is fast regaining its role as the world's benchmark currency.

It was the last currency bust-up - caused by the US attempt to fight the Vietnam War and fund the Great Society without adequate taxes - that lay behind the 1970s bull market in gold.

RBC said in a recent report: "The late 1960s saw first France and then Germany and Britain all start to swap their dollar reserves for gold. We may well be witnessing a similar situation today as price pressures build in the emerging world."