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North America Precious Metals Sectors : A Company and Industry Analysis (September 2008)
Mergent, Sep 2008, Pages: 32
This report updates the previous North American precious metals report, focusing on the markets in Canada and the United States
Current Environment - Key Points
- In the first quarter of 2008, demand for gold jewelry in the US declined as the country's economic slowdown continued to weigh on manufacturers- and consumers- pockets
- There was a decline in gold production from major precious metal companies in the US during the first quarter of 2008, compared with the corresponding quarter of 2007, mainly as a result of rising operational and capital expenditure
- In the first half of 2008, most major US precious metals companies performed reasonably on the New York Stock Exchange (NYSE) as a result of high metal prices and strong quarterly earnings
- As gold prices broke through the US$1,000 per oz mark in March, more Canadians looked to sell their gold jewelry instead of buying
Gold investment, on the other hand, was on the rise as investors saw gold as a hedge against rising oil prices and economic downturn
- Although shares of major precious metal companies were up in the first half of 2008, their share movements were relatively volatile due to investor skittishness following the lackluster first quarter performance of major commodities in the country
- M&A activity in the Canadian precious metals sector was off to a good start in the first quarter of 2008
According to Toronto-based investment bank Crosbie & Co, the total value of all M&A transactions in the gold sector during the first quarter was C$3.2 billion (US$3.17 billion), compared with C$546 million (US$540.4 million) in the same period of 2007
Industry Profile - Key Points
- In 2007, total gold, silver, platinum and palladium mine production in the US exceeded 1,478 tons, up 4.6% from 1,413 tons produced in 2006
- In the US, the 2008 budget provides US$161.5 million for the USGS- Minerals and Management Service (MMS), an increase of US$3.2 million over 2007
- Natural Resources Canada (NRCan) figures show that in 2007 Canadian mineral production was valued at C$40.4 billion (US$39.98 billion), a 19% increase from 2006
- In the Canadian mine exploration sector, precious metals led with total exploration expenditures of C$933 million (US$923.4 million), followed by base metals at C$613 million (US$606.7 million), uranium at C$354 million (US$350.4 million) and diamonds at C$308 million (US$304.8 million)
- For the whole of 2007, Ontario yielded 53% of Canada's gold production and 84% of Canada's PGM production
- For the metals and minerals sector, which includes precious metals, NRCan intends to spend C$58.5 million (US$57.9 million) in R&D for 2008, a 1.7% increase from 2007
Market Trends and Outlook - Key Points
- The first half of 2008 saw strong US investor demand for gold exchange traded funds (ETFs) due volatilities in the country's equity and currency market, as well as geopolitical tension in the Middle East
- Gold prices edged up on July 30 as investors looked to precious metals as a safe haven bet following Iran's missile test, and may continue to rise further if a war breaks out
- The lower price of gasoline over diesel in the US is negatively impacting sales of diesel vehicles, which in turn, may affect the metal's demand in the country's automotive industry
- In an attempt to cut its fuel costs, Barrick Gold (TSX: ABX) purchased an oil producer - a move which might result in other miners following suit
- Canadian platinum production is forecast to pick up in 2008 due to rising nickel production and new mines coming on line.
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