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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Gold is hitting new highs as global tensions and trade
wars show no signs of abating.
Speaker 3 (00:14):
What a momentum trade for the yellow metal.
Speaker 2 (00:17):
Gold has now risen over twenty percent since the douviest
shift from the FED back in Jackson Hole back in August,
crossing four thousand for the first time ever, and as
the price booms, African nations are doing their best to
cash in.
Speaker 4 (00:31):
Relatively from January, experts from the small scale sector reach
fifty one point five pomps, which is valued at approximately
five billion US dollars.
Speaker 2 (00:45):
On today's Next Africa Podcast, we'll look at how gold
rich countries can capitalize on the price rises and how
big the windfall could really be. I'm Jennifer's Abisaja and
this is the Next Africa Podcast, bringing you one story
each week from the continent driving the future of global
(01:06):
growth with the context only Bloomberg can provide. Bloomberg's Africa
Mining and Metals correspondent William Klouds and our Precious Metals
reporter Jack Ryan are both with me this week.
Speaker 3 (01:18):
Thank you both so much for joining us.
Speaker 2 (01:21):
Jack.
Speaker 3 (01:21):
Let's just start with you.
Speaker 2 (01:22):
Last time we were talking about gold on this podcast.
The price was creeping up to three thousand. Many people
have their predictions for the end of twenty twenty five,
but now we're seeing the metal around four thousand. What's
some of the factors behind the rising price.
Speaker 1 (01:42):
Recently? There's been kind of like this long laundry list
of things that have been driving gold higher. So we
had obviously the resumption of ray cuts, and that's good
for gold because gold obviously doesn't pay interest, so when
interest rates become lower than it becomes more healing relative
to cash. So that's something that the market is priced in.
(02:03):
It's priced in further rate cuts. And then beyond that,
we've had things like the attacks or the perceived attacks
on the independence of the Federal Reserve, and that I
think is something that really got the attention of people
who are invested in gold, because then you get the
potential for a kind of goldilock situation where you have
(02:26):
low rates, if you have a kind of plying fed
and potentially hotter inflation. Goal also is seen as a
bit of an inflation hedge, so kind of a heads
out in tails you lose scenario for gold swirling. Beyond that,
I think probably most people would agree, more geopolitical tension
in the world than there has been maybe five ten
(02:48):
years ago, and all of that stands to benefit gold.
Speaker 2 (02:52):
Goldilocks, no pun intended exactly, William jump in here. When
we take a look at some of the big gold
producers on the continent, have we seen them all benefit
from this current wave of enthusiasm.
Speaker 5 (03:04):
So when we talk about African countries which do produce
significant volumes of gold, we're talking about quite a few
of them, the likes of Ghana, Mali, South Africa, Bikina, Fasso, Sudan, Guineas,
Zimbabwe and the DRC. And that's not all of them.
And between those countries you've got a sort of differing
mix of types of gold production. So on the one hand,
(03:27):
you've got the sort of big industrial, commercial formal operations
owned by well known multinational miners like Barrick or Anglo
Gold or gold Fields, and on the other hand you've
got this production which is done by hands and rudimentary tools.
And one of the big problems for African governments, not
just now but for a long time, has been this
(03:47):
second kind of gold mining, which is often unauthorized and illegal,
which results in most of the gold being smuggled out
of the countries and therefore doesn't benefit their treasuries at all.
So the easiest, the most obvious way in which African
countries are benefiting right now is the countries that have
more of these big industrial operations, places like Ghana, Tanzaniamali,
(04:11):
and you know, they're making loads of money, loads more
money than before, just because the royalties they're receiving, in
other words, a percentage of every ounce of gold produced
and exported have shot up so much, even if overall
output hasn't changed a great deal. And it isn't surprising,
I guess, or it would be surprising if it wasn't
like this that some countries I can think of Ghana
(04:34):
and Ivory Coast to name just two, have been trying
to capitalize even more on the gold price by changing
the rates so that the state receives a bigger chunk
of the multinational company's turnover from their countries.
Speaker 3 (04:47):
Have they been successful in doing that.
Speaker 5 (04:51):
Well, It's always a bit of a fight because if
you introduce new laws, it's quite hard to to implement
changes to the rates companies pay overnight, because often companies
will argue that they have clauses that mean they're exempt
from new legislation for a period of time, maybe five years,
(05:14):
maybe ten years. So it's really really difficult to do quickly.
And the sort of most obvious example of this has
been in Mali, where the military government there has got
into the most almighty fights with its biggest investor.
Speaker 2 (05:27):
Yeah, and those contracts date back years decades, William, you've
spent quite a lot of time in the DRC. Let's
dig into what we're seeing from the country in particular
and their plans to increase extraction.
Speaker 3 (05:43):
Why does that stand out to you?
Speaker 5 (05:45):
Well, Congo's it's a bit odd in that there's tons
and tons of gold there, but it's only got a
single industrial mind. It's called Gibali and it's co owned
by Barrick and Anglo Gold. It's absolutely massive, very impressive,
but there's only one in a country that should probably
have quite a few more geologically speaking. And what's more,
(06:08):
the government thinks or says it thinks that it loses
out on about sixty tons of gold smuggled out of
the country every year. Now that's worth more than seven
billion dollars at the moment. It's a poor country and
the government would very dearly love to take its slice
of royalties and taxes from those volumes. So in short,
(06:29):
they haven't really been able to do a great deal
to increase legal formal production because mines take a long
time to build. But there's a new minds minister in
town and what he's trying to do, and what he
said he's doing, is that he's really focusing on deals
with gold miners, both major multinational players and smaller exploration
(06:50):
firms in an effort to develop more operations like Kabali
where it's easier to capture the value from that kind
of production.
Speaker 2 (07:00):
And William, what about in Ghana? What are you watching for?
What are some of the projects there?
Speaker 5 (07:04):
So Ghana's doing something interesting. It's got plenty of these
big industrial operations run by international mining firms, but it's
also got loads of this small scale activity which is
known as artisanal mining. And there's a new government in
Ghana which has been all over that and trying to
organize it better and close the leaks and benefit more
(07:26):
from that industry than before. And basically they've got this
state owned body called the Ghana Gold Board that's been
set up to purchase and sell this kind of production,
and it's in an effort to curb smuggling and boost
the local currency. Nigeria has tried to do something similar
for years, to let the central bag buy all the
gold and boost its reserves like that, but I don't
(07:48):
think that's been as effective as in Ghana. I don't
think Ghana's released the latest data for the third quarter yet,
but there gold Board bought I think it was five
billion dollars worth of gold in the first six months,
and it says it wants to buy more at least
three tons a week in the future, and is aiming
for sales revenue up around sort of twelve billion dollars
(08:08):
a year.
Speaker 2 (08:09):
Let's take a quick break, William and Jack, and when
we come back, we'll unpack more about this boom and
potentially how long it will last and whether or not
some countries are actually taking a bit of a risk
betting on the long term high of the precious metal.
Speaker 3 (08:23):
We'll be right back, Welcome back.
Speaker 1 (08:31):
Today.
Speaker 2 (08:31):
We're talking about gold's continued boom and the countries across
the continent looking to cash in. William Klous and Jack
Ryan are still with me.
Speaker 1 (08:40):
Jack.
Speaker 3 (08:40):
Before the break, we talked about.
Speaker 2 (08:42):
Some of the people on the countries looking to cash
in on this price increase. How sustainable is the price
of gold right now, though there's a number of analysts
that have their own projections for.
Speaker 3 (08:52):
The end of twenty twenty five.
Speaker 2 (08:54):
But could people start investing in more extraction only to
see the price start to falling up. That's a difficult
question to put to you.
Speaker 1 (09:02):
I think anytime someone looks at the price chart and
they see a straight line going up for two years,
they probably make should make them nervous, and maybe gold
is less appealing investment now than it was two years ago,
given it's more than twice the price. I think in
terms of the miners, probably many of them will be
hesitant to you know, ramp up their cappex invest rather
(09:25):
than returning cash to shareholders, because I think the philosophy
now that a lot of the kind of investors share
is that that's really what miners should be focused on,
disciplined about spending and handling cash. Over. Most of the
gold miners now are making or nearly all of them,
are making bonanza levels of profit, you know, maybe cost
(09:45):
them twelve hundred to sixteen hundred dollars to digging out
the gold out of the ground, and now they're going
to get four thousand dollars for it, So they're really
making an incredible amount of money, and there's an incredible
margin there where gold could follow by one thousand dollars
and they'd still be making lots of money. The unusual
thing about gold is that the pind demand dynamics are
(10:08):
not really so relevant when you're trying to analyze where
the price will go, which is unlike I think pretty
much every other commodity that I can think of, and
that I think makes it harder to analyze because really
it's a medal where the price is all about sentiment.
I think it will be stronger supported if we don't
(10:29):
see an end to some of the trends that we've
seen over the last few years in terms of maybe
the multilateral system and trading relationships and just positive relationships
the nation states. Generally, if they don't continue to deteriorate
or if they begin to recover, then gold might suffer
from that. But other than that, most of the tailwinds
(10:52):
are still blowing and it's at its back.
Speaker 3 (10:55):
William. Let's just talk about some of the other risks.
For some of these gold producers.
Speaker 2 (11:00):
Many of the countries with the gold reserves are relatively unstable,
as we were mentioning controlled by military junta is dealing
with illegal miners. Do you think that affects the appetite
for investors in some of the projects across the continent.
Speaker 5 (11:15):
I'd say so yeah, But it's I mean, it's hard
to calculate how many more mines there would be in
places like Mali, or how much more investment if the
government was different or the security situation was better. But
what I would say is that there are still a
few companies which want to build gold mines in Mali
and are raising money to do it, even after Barrick
(11:40):
Mining got deep into its problems and ended up losing
its mind at least on a temporary basis, and executives
at another company were detained and effectively held hostage while
Marley negotiated with that company. You know, perhaps this company
I'm thinking of, it's called Tobani Resources, is very very
very brave, or maybe Barrett just played its hand very poorly.
(12:05):
But you know, there is still interest. But if you
look at the geology and gold deposits and some of
these riskier countries. There should be more industrial minds there
and there would be more appetite at this time in
this market if say northeastern Congo and Sudan were safer,
(12:25):
or Bikina Fasso had a different government.
Speaker 2 (12:28):
If we do see the price continued to rise, does
that affect what you are paying attention to with some
of these projects or will they continue to invest and
push forward as you were just mentioning, regardless of the
price wings No.
Speaker 5 (12:43):
I don't think they'll push forward regardless because there are
other places you can do this. So I think, you know,
there's always going to be a bit of Congo risk
associated with building a new industrial gold mines in Congo.
It's it's you know, you see this with other commodities
when prices a sky high too. Whether these reputations for
(13:07):
being a risky jurisdictions.
Speaker 3 (13:09):
Are deserved or not.
Speaker 5 (13:11):
And a lot of these African governments would say they're
unfairly treated in a way they're seen by Western investors.
In particular, it definitely does act as a drag on
investment that probably would go in if the consideration was
based exclusively on geology and deposits.
Speaker 2 (13:32):
William Klous and Jack Ryan Thank you both so much
for joining us this week and for your reporting. You
can of course read all the latest reporting on gold
across Bloomberg platforms now. Here's some of the other stories
from the region we've been following this week. Nigeria is
planning to raise as much as two point three billion
(13:54):
dollars in a eurobond sale in the fourth quarter, potentially
joining other African issuers taking advantage of.
Speaker 3 (14:01):
Lower borrowing costs.
Speaker 2 (14:03):
And Egypt is asking its liquefied natural gas suppliers to
delay shipments scheduled for the rest of the year on
weaker than expected demand. And you can read more of
these stories across Bloomberg platforms now including the next African Newsletter.
Speaker 3 (14:18):
We'll put a link to that in the show notes.
Speaker 2 (14:23):
This program was produced by Adrian Bradley and tiua Adebayo.
Don't forget to follow and review this show wherever you
usually get your podcasts, But for now, I'm Jennifer Zabasanja.
Speaker 3 (14:33):
Thanks as always for listening.