Gold mining executive says falling gold price highlights need for government cooperation

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Mining company Randgold Resources’s chief executive Mark Bristow has said that the recent drop in gold price has highlighted the need for governments of mineral-rich countries to cooperate with mining companies in the optimal development of their resources.

Governments are tempted to harvest the green shoots before the enterprise comes to fruition; the gold mining industry tends to exaggerate the risk without fully addressing its own internal problems.

He said that while the aims of governments and miners should be in sync, there is a disconnect arising from the misperception gold mining companies must have made big profits during the long bull run in gold prices. But escalating costs means many did not manage to create real value, and a falling gold price is hitting hard.

Real value is created by the discovery of multi-million ounce deposits and their development into profitable mines. Governments' role in this should be firstly to provide a stable, business-friendly regime that will attract investors, and then to partner the mining company in the development process, driving the project up the value curve and sharing fairly in its returns.

Speaking for Rangold, however, he said that the company could “face any realistically foreseeable gold price scenario with equanimity” and that the current squeeze has created new opportunities as junior competitors are squeezed out.

Gold is currently priced at $1,253.69/t oz. Since August 2011, it has fallen from a peak of around $1,900/t oz.