By Jan Harvey
Mon, Sep 27 06:41 AM EDT
BERLIN (Reuters) – Barrick Gold, the world’s number one miner of the precious metal, said on Monday gold prices could “easily” outperform recent record highs to rise above $1,500 an ounce in the next year.
“From what we’re hearing, there are still significant new buyers coming into the market,” Jamie Sokalsky, the company’s chief financial officer, told Reuters on the sidelines of the London Bullion Market Association here.
“My view is that we could see much stronger prices still from here,” he said, adding: “I can see gold easily taking out new highs and going above $1,500 an ounce in the next year.”
Spot gold rose to a record high of $1,300 an ounce on Monday. Delegates at the LBMA meet were bullish on prices earlier on Monday, delivering an average forecast of $1,406 an ounce for this time next year.
Sokalsky said compared with where gold was in the early 1980s, at around $2,300 an ounce on an inflation-adjusted basis, prices still had substantial upside.
“Given all the factors that are there to support gold — macroeconomic factors, supply and demand factors, geopolitical tensions, a still-simmering sovereign debt crisis — I think the ledger has so many more reasons to buy gold that to sell,” he said.
He said the company’s recent closure of its hedges — forward sales of gold made to lock in prices of future production — meant it now had greater leverage to the rising gold price.
Demand for gold has soared in recent years as the financial crisis boosted the precious metal’s appeal as a haven from risk, while concerns quantitative easing may debase paper currencies have fueled buying of bullion as an alternative asset.
Supply has struggled to keep pace, with central bank selling, once a significant source of bullion to the market, falling off sharply and scrap supply erratic despite rising prices.
Sokalsky reiterated Barrick’s output forecast of 7.6-8 million ounces for 2010, but said the company’s $500 million Cortez Hills mine, which went into production in the first quarter of this year, was likely to outstrip its current production target.
“The first two quarters have been great quarters for the mine, so we expect to exceed that guidance of 1.1 million ounces…probably in the neighborhood of 5-10 percent,” he said.
Barrick’s cash costs for the year were likely to be at the upper end of its existing $425-455 an ounce guidance as rising gold prices increased royalty obligations, he added.
Nonetheless he said margins remain healthy. “We are seeing significant margin expansion,” he said. “In the second quarter our margin against cash costs was over $700 per ounce.”
He said when two projects currently under construction — Pueblo Viejo in the Dominican Republic and Pascua-Lama on the Chile-Argentina border — are in full production, they will contribute 1.5 million ounces a year for the first five years at cash costs below $200 per ounce.
“These are very good long-life projects that, once in operation, will look to lower our overall cost base,” he said.
(Reporting by Jan Harvey; Editing by Sue Thomas)