Free: Brummell Magazine Online

Teresa, November 28, 2007 @ 6:06PM ET | Link | RSS | Read via Email | Start a Discussion  

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Brummell bills itself as “The Little Black Book From The Financial News”. The October issue has been posted, free. [READ]

Press Digest for Wednesday

Pete, November 28, 2007 @ 5:16PM ET | Link | RSS | Read via Email | Start a Discussion  

NovaGold: Gold mining is not as easy as it looks

Teresa, November 27, 2007 @ 2:20PM ET | Link | RSS | Read via Email | Start a Discussion  

Yes, gold is going up, but investing in gold miners is never as easy as it looks.

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The problem, of course, is how to get more gold. Unlike past gold rushes, this cycle is plagued by higher production costs (environmental regulation, lack of engineers) and uncertainty (gyrating prices and currencies). Even sitting on a gold mine in a bull market is no guarantee, as investors in Teck and their partner, NovaGold (NG:AMEX) found out yesterday, having spent $800 million so far:

Teck Cominco, NovaGold step back from Galore Creek plan
“It is indeed a very disappointing moment,” Teck CEO Don Lindsay said during the call. “I know there are many stakeholders who would have preferred that we push [ahead] in the hopes that commodity prices would stay high. But in the end, we feel compelled to take the prudent decision and cut back spending to a minimum while we determine a new more economic way forward.”

“Very few copper-gold deposits of this quality have been discovered over the last few years even though the industry has invested billions of dollars in exploration world-wide,” said Mr. Lindsay. “Galore Creek is a substantial resource and we will continue to work to determine how and when it can best be developed.”

. . . Mr. Lindsay said that although Teck will take a writedown on its investment in the project in the fourth quarter, it will not write it off entirely. “We will not write it down to zero because we think it still has significant value,” he said.

The companies said that the stronger Canadian dollar has had very little impact on projected capital costs, but that it has affected forecast operating profit margins and make Galore Creek “uneconomic at current consensus long-term metal prices.”

Mr. Lindsay declined to the specific prices on which the companies have decided to pull back, but did not appear to quibble with figures suggested during the call by several analysts of about $1.50 (U.S.) a pound for copper and $600 an ounce for gold. These compare with current prices of more than $3 a pound for copper and $820-plus an ounce for gold.

Mr. Lindsay declined to the specific prices on which the companies have decided to pull back, but did not appear to quibble with figures suggested during the call by several analysts of about $1.50 (U.S.) a pound for copper and $600 an ounce for gold. These compare with current prices of more than $3 a pound for copper and $820-plus an ounce for gold.