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Rocketing gold price breathes fire into Glass Earth
CATHERINE HARRIS Last updated 05:00 15/08/2011
Gold's stellar performance last week has given a confidence boost to gold exploration company Glass Earth.
The spot gold price touched a record US$1800 last week, although by the weekend it had slid to $1746 an ounce, in reaction to a rise on Wall St.
In New Zealand, AX-listed Glass Earth shares closed unchanged at 70c on Friday. They have almost doubled since the end of June after a company roadshow and indications of high-grade gold and silver deposits at Muir's prospect in the central volcanic region.
The firm also has a joint exploration venture near Newmont Mining's Martha Mine and mines alluvial gold in Central Otago.
Glass Earth chief executive Simon Henderson said the rising spot price for gold, combined with the falling New Zealand dollar, was giving it an excellent return "and that helps balance the books".
It also improved the climate for raising funds. Glass Earth was aiming to increase output "and so the gold price encourages us to accelerate that as fast as we can".
In contrast with Glass Earth, shares in New Zealand's biggest gold producer, Australia-based OceanaGold, have been up and down for months. They have fallen from a peak of $5.25 in September last year to $2.65.
Head of business development Darren Klinck said gold mining company shares "have been underperformers against the gold price, and it's an anomaly that we've seen since January but nonetheless ... if this is maintained you'll see these gold prices positively affect earnings and cashflows into companies.
"And gold companies today are pretty well financed, pretty well cashed up, because they have been enjoying stronger prices for their commodity."
He noted gold's value had increased even more sharply in New Zealand, with the price hitting NZ$2224, $350 to $400 higher than two weeks ago.
OceanaGold, which is listed in New Zealand, Australia and Toronto, continues to take increasing volumes of gold from mines in Reefton and Central Otago and expects to open a new mine in the Philippines at the end of next year.
"It's a very transformational project for the company. It's the first mine outside of New Zealand and it's one that will demonstrate our first exposure to copper in addition to gold," Klinck said.
The country's other big gold miner, US-owned Newmont, said the gold price had made no impact yet on its revenues, which were calculated on a rolling three-year average.
Its Martha mine is due to close in 2014, and Favona at the end of this year but an extension called Trio is due to open soon.
Gold's value has risen 20 per cent since June as investors eye up the European and United States debt mountains and retreat instead to gold as a hedge against inflation.
So traders do not expect gold's long-term march upward to end any time soon.
"All of the positive factors that have been supporting gold for the last several months are not dissipating," David Meger, of Chicago commodity broker Vision Financial Markets, told Reuters.
- BusinessDay.co.nz