Gold is the favoured commodity of 2013 29.01.2013

Gold is the favoured commodity of 2013

Moscow – January 29, 2013 – According to the latest PwC Gold Price Report, gold is the favoured commodity of 2013 with more than 80% of gold executives expecting to see a rise in the price of gold. An analysis of the 46 largest TSX- listed gold mining companies showed that more than 20 of these gold companies have cash reserves greater than $500 million.

John Gravelle, Mining Leader for PwC in Canada and America comments:

“Gold miners are adamant about proving to the market that they’re once again a good investment — not just for the interim, but for the long-term. Receiving investors’ approval will involve establishing cost effective management strategies, increasing dividend payments and responsibly investing in production growth — all on the back of a strong gold price.”

There’s been a shift in focus with gold executives concentrating on the bottom line — specifically focusing on the rate of return of per ounce produced. According to the report the long-term price of gold used by gold miners has increased six per cent from last year and 29% from two years ago to $1,400 per ounce.

Regarding development and exploration spending, 100% of senior gold companies used cash for such activities and they plan to do the same for the upcoming year. Meanwhile, 89% of mid-tier gold companies will use cash for project development and 83% will use cash to fund exploration activity in 2013.

Some senior gold miners may also use their cash for strategic M&A activity. Twenty per cent of senior gold companies plan to spend their money on acquisition related activities in 2013, while 33% of junior/mid-tier companies expect to spend their cash on acquisitions — this is double the number of companies that spent money on M&A activity in 2012 (14%).

While Canada tops the list with the most active gold buys in 2012 with 243 transactions worth $4.8 billion, China continues to keep an eye out for gold mines to acquire. In 2011, four of the top gold deals were acquired by Chinese buyers. This year, China was again responsible for four out of the top 10 gold deals announced.

Alexei Smirnov, Mining Leader at PwC Russia says:

“Chinese state owned entities remain interested in expanding their gold mining assets outside of China to secure steady access to gold in the future.”

In the last few years, China has heavily invested in the African mining industry.

Alexei Smirnov adds:

“There are a number of examples of controlling investments by Chinese and Indian companies into gold, coal, and other commodity projects in Africa. Chinese investors come with significant financial support, facilitating the development of capital intensive mines”.

By PwC.

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