By CLARISSA MOI
THE expected strength of gold prices should be positive for the country as a significant gold producing nation, according to K92 Mining Ltd.
Chief executive officer John Lewins when responding to queries from The National regarding the United States and Iran political tension which has seen an increase in global gold prices, said the expected strength of the price of gold would be positive for Papua New Guinea.
“The recent US–Iran political tension on top of the existing trade and financial tensions between the US and China are generally seen as drivers for a higher gold (and oil) price,” he said.
“But it’s potentially also negative for the overall world economy hence we have seen the equity markets generally weaker.”
Lewins said the total production from PNG’s gold and copper mines was estimated to be more than two million ounces this year, so every US$10 (K33.92) increase in the gold price would result in an increase of US$20 million (K67.85 million) in revenue for the industry.
“That in turn will result in an increase in royalty payments and corporate taxation,” he said.
“A higher gold price is also positive for exploration as it encourages more exploration and is also positive for new projects, making them more attractive.
“The impact on LNG (liquefied natural gas) prices is a more uncertain as while increased oil prices should help support higher LNG prices, a potential weakening of the world economic outlook would be negative for LNG prices, so it’s a bit of a mixed bag.”
Lewins said a weakening economic outlook was also negative for copper and metal prices especially if the trade war between the US and China continued (in 2018 China consumed almost 50 per cent of the world’s copper).
“As noted in times of uncertainty, gold is seen as a ‘safe haven’ and so the expectation would be a higher gold price in the short to medium term.
“This may result in some gold companies taking advantage of the elevated gold price to put in place some hedging to lock in this higher price for at least part of their future production.”
By CLARISSA MOI