Gold CEO Blasts 'Hysterical' Fund Managers Chasing Quick Cash
Comment of the Day

May 05 2021

Commentary by Eoin Treacy

Gold CEO Blasts 'Hysterical' Fund Managers Chasing Quick Cash

This article by James Attwood for Bloomberg may be of interest to subscribers. Here is a section:

“I’m cautioning people not to become too obsessed with stripping the industry out of its cash, and not allowing strengthened balanced sheets to be built and investments in the future,” he said. “Whether it’s exploration or deal making, it’s got to create value and you can’t create value as a mining executive if you don’t have support from the fund managers.”

Eoin Treacy's view

Investors have been conditioned to expect well-capitalised companies will buy back shares, pay special dividends and will not engage with capital intensive business lines. That sounds great for tech companies but it doesn’t work for miners. Mining executives that are not actively engaging with M&A targets are coming under profound pressure to distribute available cash. Meanwhile there is no tolerance for green field exploration among either large miners or investors. No one wants that kind of open-ended risk. The 10-month correction in the gold price will only have further damaged appetite for investment in new supply and particularly from banks which control the supply of liquidity. At a minimum it will require even better prospects than normal. That bolsters the limited supply argument over the medium term.

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