THIS year's recipient of the 2007 Diggers & Dealers G J Stokes Memorial Award, Newmont vice chairman Pierre Lassonde, believes the resources boom will last a whole generation.
Pierre Lassonde
Kicking off the annual mining forum held in Kalgoorlie, Lassonde warmed up the packed house by telling his tale of lost luggage and the hardship of trying to buy a "polyester" suit in the town on a Sunday afternoon.
Peppering his presentation with entertaining anecdotes, Lassonde got down to business, paying particular attention to the "super cycle" the resource sector is enjoying and drawing comparisons to the last super cycle between 1966 and 1980.
Lassonde said that just like the last super cycle that was propped up and prepared by the baby boomers, this cycle was the work of China and India's booming economies.
He said the external factors were also strikingly similar, including wars in both cycles, for example, the Vietnam war in the past and the current war in Iraq and on Al Qaeda.
Inflation was also high in both eras and gold in the past shot up 2300% while currently it is up 170%.
"Gold's time is coming," he said.
However Lassonde said the similarities ended there and the difference between the two super cycles was that more companies – paying particular homage to the oil sector – were increasingly government controlled.
He said profits were not going into exploration, hence discoveries have decreased, and permitting, political and environmental responses have become more challenging.
Building on the differences, Lassonde said the gold sector was not coming up with the big discoveries made in the past super cycle, although this time around exploration budgets were bigger.
"The big discoveries – the Yancochas, the Super pit – they were all made back in the 60s, 70s and 80s," Lassonde said.
"Look at the past 20 years, [discovery is] coming down and down and down.
"When is the last time you had a 30 million ounce discovery in the world? Not in this decade I can tell you that."
Lassonde also said demand for gold jewellery is at an all time high, with advertisements placed by the World Gold Council – which Lassonde is a member of – in China, India, America, Europe and the Middle East having a profound effect.
Wrapping up the presentation, Lassonde gave several predictions for this current super cycle, based on past events.
"This bull market in natural resources will last a whole generation, that's 20 years plus and, yes, China and India will have hiccups, but while they have crisis situations they will not stop growing," he said.
"The $US dollar over the next five years will plunge against [China's] RMB."
Lassonde predicts the Canadian and Australian dollar will grow a further 5-10% against the US dollar, with the Canadian dollar reaching a high of around $1.06.
Based on history, Lassonde said copper and moly producers have been unable to withstand prosperity. He added that we have probably seen the metals' price reach its peak.
Commodities to perform well in this cycle are nickel, platinum, gold and oil, and in his mind the last two commodities will perform the best in this cycle.
Lassonde also brought in the Dow Jones index into his prediction, saying the gold price and the index will come down to a 1:1 ratio.
This would be similar to the path taken in the last cycle in the 1960s when the ratio was 28:1, and in the 80s when it was a 1:1 ratio.
Lassonde said in 2000, the ratio was 42:1 and that the ratio has decreased to 20:1.
Sure to leave a good taste in the mouths of gold investors, Lassonde's final prediction was that gold would have three zeros in its price, however he conceded he had no idea what the first number could be.
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