Q:Should average investors have gold in their portfolios?
A: The short answer is yes. I do believe that anybody in this market – a bull market for hard assets – should have 5 to 15 percent of their assets in gold or precious minerals. It is a matter of diversification out of financial assets because financial assets are in a bear market for the next 10 years.
Q: Tell me about gold. Where is it heading in the future?
A: A lot higher. I think that you will see gold with three zeros after the first number. I just don’t know what that first number is going to be. So I think it’s going to be over $1,000 (an ounce), but is it going to be $2,000 or $5,000? I don’t know.
Q: When will we see the three zeros?
A: Probably in the 2010, 2014 area.
Q: What’s driving the price right now?
A: The last time we saw $570 gold price was 1980. (Gold for June delivery closed at $635.50 on Friday.) So why is that? One reason is … the gold ETF (exchange traded fund), the famous gold ETF that the World Gold Council created. That gold instrument is the best thing we’ve done for the gold industry in 30 years.
Q: You are known as an unabashed bull when it comes to gold. Do you think that can diminish your credibility?
A: Not at all. First of all, I’m not an unabashed bull. In fact, in the late 1990s, I was a bear. When people asked me where I thought gold was going I used to say down.
The central banks were sellers, the big companies were hedging, and the dollar was a very strong currency and you didn’t need gold. Now we happen to be in a bull market. Not only are we in a bull market for gold but a bull market for all hard assets – petroleum, real estate. All hard assets.
Q: Where did you grow up, and how did you end up in Denver working for Newmont?
A: I grew up in a small town just outside of Montreal, St. Hyacinthe, that’s 100 percent French. I did my engineering at Polytechnique, University of Montreal, then went on to the University of Utah in 1971 for an MBA and degree in advanced powder skiing. I worked in San Francisco for Bechtel for a few years before going back to Canada in 1975.
I started Franco-Nevada in 1982 with my business partner Seymour Schulich and over 20 years grew the business from an original $2 million investment to over $3.2 billion. Newmont bought it in 2001, and that’s how I landed back in the United States when they made me an offer I couldn’t refuse.
Q: Newmont has been surpassed by Barrick as the world’s largest gold producer. Does that affect Newmont’s operations, investor appeal or future outlook?
A: The short answer to that is no. First of all, Newmont is the only gold company listed on the S&P 500, and for the time being, I think we will stay the only company.
Two, it doesn’t affect any of our operations. We’re the only company in the world today with five new projects that will produce over 2.5 million ounces of new gold a year that we will bring into production in the next 30 months. We have a suite of projects in the pipeline that is the best of anybody in the world.
Q: Are there any strategic acquisitions in Newmont’s future?
A: More than likely. I think Newmont as a company can continue to grow internally at a rate of 2 or 3 percent. It is very difficult as a natural-resource company to grow at a much higher rate than that in terms of reserve replacements and growth.
So if we want to grow at a 5, 7, 8 percent rate, we have to make acquisitions. That is what we’ve done as a company, and we are going to continue to do that. We think that between our own internal growth and a few strategic acquisitions, we can regain our No. 1 position.
Q: Where does Newmont stand in terms of commitment to gold operations in Indonesia, especially after the difficulties over the environment and the health issues?
A: Let me say emphatically that all the charges that were brought up were entirely false.
In terms of our operations, we’re mining, we’re producing, we haven’t had any social or environmental issues. We’ve had some technical difficulties, but they are nothing that you don’t expect, and we’re going to continue.
Q: Assess the outlook for Newmont in places like Ghana, Peru, Australia and Nevada.
A: Our vision is to have 50 to 60 percent of our assets in developed countries in what we call triple-A-rated developed countries. That’s the U.S., Australia and Canada.
As far as Peru, Indonesia and Ghana, they are equivalent. Is one better or worse than another? I don’t think so. They all have challenges – infrastructure challenges, political challenges. They each require a great deal of management time.
Right now, Ghana is absolutely the star in our organization because we’ve been able in three years to grow reserves from 2.6 million ounces to almost 20 million ounces. We’re starting one operation this summer that will produce well over half a million ounces a year, and it’s got a 20-year mine life.
Q: You are an art collector. Would you tell me about one of your favorite pieces?
A: It was a painting that came up for sale in Canada – a painting by (James Wilson) Morrice.
The (seller) was the daughter of the biggest collector of Morrice in Canada. He gave his entire collection to the national museum … but one.
It was like the Canadian art piece of the 19th century … in terms of representing the use of Expressionist painting to represent Canada.
It’s a winter scene, snow falling over a French Canadian village … the river coming through it and the sun is setting. It is just a stunning painting.
Edited for length and clarity from an interview by staff writer Steve McMillan.
