The local gold-mining industry appears to have quickly come to terms with the sudden change in the direction of gold prices, which began with the biggest one-day decline in several years in mid-April, falling by US$140.30 or 9 per cent to US$1,361.
What the downward movement in the price of the precious metal has done is to drive home to local gold miners the reality of what it means to be a price-taker, a peripheral player that makes only a miniscule contribution to global gold production.
Not that the price movement has engendered discernable concern in the sector. “Interestingly, there appears to be no sense of panic among local gold producers,” Guyana Gold and Diamond Miners Association (GGDMA) Administrative Coordinator Colin Sparman told Stabroek Business late last week. He explained that the impact of the recent gradual rise in gold prices has, up until now, been offset by the fact that local miners had enjoyed “considerable and sustained price increases” following steady price increases every year since 2001.
While gold prices have been gradually falling since hitting a peak of US$1,900 in August 2011, Sparman says that the significant sell-off which accelerated early in April was a new experience for some of the more recent players in the local mining sector. Still, the cushion created by years of price increases coupled with the fact that the operating costs in the sector remain constant have combined to provide miners with some measure of breathing space. “While the downward price movement obviously means that profits will be thinner, at least we have a situation in which that operating costs, notably food and fuel costs remain stable,” Sparman says.
Still, he says, the recent behaviour of the global gold market puts into perspective the vulnerability of producer countries like Guyana. He explained that while just a few weeks ago Guyana had been in the throes of aggressive investment in the industry by both large and small scale investors, the sudden downward shift in the price of gold sends a sobering message about the vagaries of the market.
And though Sparman says that the expectation is that the slide will not be a sustained one, he adds quickly, “whether or not gold prices will return to earlier price levels is another matter.”
Meanwhile, he says, miners are assuming a “wait and see” position. “Our information from the mining areas is that some mining operations may now be down from perhaps five to three dredges. The situation has also coincided with the current rainy period which means that pits are flooding so that the miners are using the opportunity to pay some attention to the rehabilitation of equipment. In other instances, some miners are simply taking a break from the interior in order to attend to family matters at home.”
