Canada Connection: Going for the gold

The Royal Canadian Mint recently unveiled what will likely become the largest symbol for Canada’s vast resource wealth.
 
In April, the Ottawa-based mint took the drapes off the world's first 100-kilogram (220 pounds or 3,215 troy ounces) gold coin with a face value of C$1 million. And the pizza-sized coins are now on sale for between C$2 million and C$3 million.
 
The timing was a bit ironic, however.
 
Gold prices have been slumping this year after a huge 23% increase in 2006 on top of an 18% increase in 2005. After peaking at about US$730 in mid-May 2006, gold is currently trading at about US$665. Part of the reason is the amount of gold suddenly hitting the markets as central banks such as the European Central Bank, the Bank of Spain and the Bank of France unloaded large volumes. “There have been unusually large central bank sales over the past couple of weeks and that’s weighed on the market,” said Bill O’Neill, co-founder of the commodity consultancy, LOGIC Advisors.
 
The Royal Canadian Mint’s monster gold coin debuts at a time when Canada, once one of the world’s largest gold producers, has seen its production drop in the last decade by almost a third to about 140,000 kilograms a year, mostly from about 330 so-called hard-rock underground mines. And few analysts believe that there is the likelihood of any major discoveries in Canada.
 
But that does not stop the gold bugs.
 
For publicly traded companies in Canada, gold exploration and production are still a big deal. Dominated by major producers like Placer Dome Inc., Barrick Gold Corp. (NYSE: ABX) and TVX Newmont Americas (previously known as TVX Normandy Americas), gold companies on the Toronto Stock Exchange (TSX) raised about US$1.5 billion in 2005. Combined, their 3 billion shares are worth about C$58 billion.

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