Richard (Rick) Mills
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As a general rule, the most successful man in life is the man who has the best information
Gold miners, because the number of discoveries was falling and existing deposits were being quickly depleted, have had to diversify away from the traditional geo-politically safe gold producing countries, ie Canada, the U.S. and Mexico. The move out of these “safe haven” countries has exposed investors to a lot of additional risk.
In many parts of the world capitalist hating Marxist governments are becoming greedy. Many countries might come to mind as places where shareholders could, without warning, receive news that their operations have been taken over, expropriated, by the government and/or its friends, or that permits are suddenly suffering delays or have been cancelled outright.
One of the most serious and unpredictable risks facing mining operations and investor interests is "country risk" - where the political and economic stability of the host country is questionable and abrupt changes in the business environment could adversely affect profits or the value of the company’s assets.
We’ve seen far too many instances of companies losing assets that were lawfully theirs.
If the management side of the companies we invest in is so important then maybe we should start regarding the management of the country they operate in as at least as important? There is nothing quite so heartbreaking to an investor as having his company’s flagship project taken over, nationalized, by the "El Presidente for life" of the country they’re working in.
Below is a chart from statista.com showing slowing global gold mine production.
According to the World Gold Council; Gold demand rang in at 4,212t for 2015, virtually the same as in 2014. Annual gold mine production increased at the slowest rate since 2008 and re-cycling has dropped to multi year lows.
Gold demand growth rose in the fourth-quarter 2015 - demand was 1,117.7 tons, up 4% from the same period a year earlier.
World Gold Council