Gold Miners Converge on Denver

By Steve Fiscor

Last month, the CEOs from all of the gold mining companies gathered at the Hyatt in Denver for the annual Denver Gold Forum. The Denver Gold Group hosts this exclusive event for gold executives, investors, analysts, and the media, and this year they celebrated the forum’s 20th anniversary. Looking around the Hyatt ballroom, one could only imagine how many billion of dollars of investments were at stake and how it would be affected over the course of the next three days.

This year the event was very upbeat. After eight years of rising prices and increasing investment demand, according to the CPM Group, it is clear that the gold market is not experiencing ‘just another bull market’ along the lines of the five previous ones that have occurred between 1965 and 2000. For almost 40 years, the CPM Group has studied the gold market and the fundamentals have changed so much that the CPM Group decided to alter it approach to analyzing current market trends. In its annual report, CPM Gold Yearbook 2009, the group says that something much larger and permanent appears to be underway. “The gold market in fact appears to be in the early stages of a secular, long-term shift, in which gold is reclaiming at least a portion of its status as an important financial asset,”—CPM Gold Yearbook. The study, as do others (See Markets, p. xx), also cautions investors that recent new high gold prices might be based on recession fears and recessions end. But, no one expects gold to drop too far.

The forum is organized with juniors presenting in concurrent sessions the first day, followed by mid-tier miners, royalty companies, and other precious metals, in concurrent sessions on the second day. The morning of the third day is reserved for the majors. There is noticeable level of momentum and investor confidence throughout the event. Junior gold companies are speculative plays and it is easy to become skeptical sitting through the junior sessions. While writing for the Enterprise, Samuel Clemens once said, “A gold mine is a hole in the ground with a liar standing by it.” Junior stocks, however, are where the big opportunities for traders lie.

The usual suspects were present. Rob McEwen was there wearing two executive hats, Minera Andes and U.S. Gold. He expressed his impatience with JV partners in Argentina. George Salamis, CEO from Rusoro Gold–the Russian-owned mining company with projects based in Venezuelan—was trying to downplay the spy novel image that some in the industry have conjured. Jake Klein, CEO, Sino Gold, which was recently sold (See News, p. xx), gave an interesting perspective of the fractious nature of the Chinese gold market. Doug Silver, CEO, International Royalty Corp., posed a rhetorical question of why an investor would choose and Exchange Traded Fund (ETF) over a royalty company; after all they both do the same thing.

The Ivanhoe Mines CEO Bob Friedland drew at standing-room only crowd as he discussed the Oyu Tolgoi project in Mongolia. To demonstrate the shear size of the deposit he superimposed a 3-d view of the oerbody above a map of Manhattan. He also discussed some of the new exploration techniques the company was using to map ore depositis in the Gobi Desert. Friedland, who talks quickly, could barely contain his presentation in the time allowed, but managed to also weave in his beliefs on why the Chinese would control markets: they have the money and they are smarter than most of the world on a per capita basis. He also joked that he planned to create a rhenium ETF and corner the market.

Aaron Regent, the new Barrick CEO, also drew a large standing-room only crowd. He might have been the youngest gold executive and certainly the youngest amongst the major gold producers. His presentation was polished, because of the recent announced de-hedging (See Leading Developments, p. xx). He appeared unflappable, as he fielded a lot of questions from the crowd. For his first appearance at the Denver Gold Forum, he held his own as one would expect from the leading gold producer.

The situation is always an interesting role-reversal, where the CEO gets 25 minutes to put his best foot forward then he takes questions from the analysts and investors. This is not a group of misinformed J-school majors at a press outing. These investors have tens of millions of dollars tied up in gold mining. Every CEO thinks his company is under-valued. On more than one occasion, however, the investors asked: “Sir, you’re in the fifth year of a major bull market, flush with cash, why don’t you fund some of these projects yourself instead of continuing to dilute the stockholder value?” In the corporate world, the management team answers to the CEO. At the Denver Gold Forum, the CEOs pitch their companies to the investment community and they answer to the investors.