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(Bloomberg Opinion) -- Bullion prices are at their highest in seven years, closing in on $1,600 an ounce. Gold held by exchange-traded funds is at all-time records and rising, thanks to worries over the economic damage inflicted by the coronavirus outbreak. Reserves, meanwhile, are depleting. It’s a heady mixture for miners, but perhaps not yet an intoxicating one.Take Polyus PJSC, Russia’s largest gold digger. The $17 billion company said last week that it would pay down debt before beginning to spend seriously on its $2.5 billion Sukhoi Log project, set to add 1.6 million ounces a year to supply. That’s quite a statement. This is one of the world’s lowest-cost producers, generating plenty of cash, holding one of most impressive untapped resources globally, at a time of rising prices. The mine promises significant extra output for a company that aims to produce 2.8 million ounces this year. Even so, Polyus is resisting the urge to fast-track, with a roughly two-year “transitional period” of planning before it begins in 2023.Granted, there are circumstances peculiar to Polyus that suggest conservative timing and financing is necessary. The miner is controlled by the son of Suleiman Kerimov, one of a handful of tycoons included in Washington’s 2018 sanctions list. A planned $900 million equity sale to Chinese conglomerate Fosun Group fell apart earlier that year, too. The project itself, meanwhile, is vast, and deep inside Russia, hardly a popular jurisdiction with foreign mining investors.Polyus’s conservative approach is noteworthy, nonetheless. This is an industry that has in general become far more cautious with big-bang projects after a string of boom-time efforts a decade ago, begun in haste and regretted at leisure. Barrick Gold Corp.’s Pascua Lama in South America started in 2000 as a $1.2 billion project; by the time it was shelved in 2013, the estimated cost had soared to $8.5 billion. Polyus learned its own lessons at its Natalka mine. It was trapped by falling prices in 2013 and construction eventually paused, before resuming in 2016. Certainly Sukhoi Log, first studied by Soviet geologists in the 1970s, comes with history and plenty of challenges. The size, at some 63 million ounces and as much of a quarter of Russia’s gold reserves, means it is the largest project on the industry’s horizon, by some way. For Polyus, it adds the equivalent of the annual output of its nearest rival, Polymetal International Plc. That gargantuan scale that leaves plenty of room for costs to spill over. There is processing to resolve, all on site, and transport logistics will be complex given the mine’s location. When I visited in 2012, the airport in the nearest settlement closed if it rained.But the geology isn’t unfamiliar to Polyus, already operating nearby. It will use conventional processing. And the miner’s overall expenses are low by global standards. Its all-in sustaining cost was $594 per ounce in 2019, against Barrick’s $894. That’s a substantial margin even if bullion prices sink to the $1,050 used in Polyus’s Sukhoi Log calculations. It’s all a far cry from the mood of the 2000s bull run, when gold shot up to $1,900 an ounce from $300 in just over a decade, and miners raced behind. The resulting value destruction was immense: Billions were spent on terrible projects and worse companies. A full 80% of the transaction value of the eight largest deals between 2001 and 2011 was impaired, according to a McKinsey & Co. study published last year. The industry’s return on capital between 2010 and 2016 was a pathetic 2.6%.With the gold price trending higher after a couple of years around $1,200 to $1,300, deals have come back, and cashflows are helping exploration budgets rise. It’s notable that M&A discussions are beginning to build in prices closer to $1,500 than the $1,200 or so of recent years. It’s exuberance that hasn’t quite fed through to mega projects.Polyus’s muddy knoll in bleak eastern Siberia has enough gold beneath it to rival behemoths like Grasberg, in Indonesia. As prices climb and buccaneering projects like Newcrest Mining Ltd. and Harmony Gold Mining Co.’s Wafi-Golpu in Papua New Guinea are back in discussion, the question is whether Polyus sets a trend, or becomes the judicious exception. To contact the author of this story: Clara Ferreira Marques at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- At 10 p.m. on the second Sunday in December, a criminal platoon armed with AK-47 and R6 assault rifles stormed one of the largest gold mines still operating on South Africa’s fabled Witwatersrand basin.Moving with military precision, the 15 attackers took hostages and plundered the smelting plant at Gold Fields Ltd.’s South Deep mine. While failing to break into the main vault, the gang escaped three hours later with gold concentrate worth as much as $500,000.Violent crime soared through a decade of kleptocracy and graft under South Africa’s former President Jacob Zuma. Gold mines offer soft targets for syndicates that previously specialized in cash-in-transit heists. Their foot-soldiers outgun a demoralized police force and pile woes on a gold industry in the final stages of a decades-long death spiral.“Mining companies are being attacked by thugs and armed gangs and there is a lack of police response,” said Neal Froneman, chief executive officer of Sibanye Gold Ltd., which repelled an attack on its Cooke mine two weeks ago. “It eventually has a knock-on impact into society, it’s lawlessness, it’s anarchy.”There were 19 attacks on gold facilities last year, almost double the number in 2018, according to South Africa’s Minerals Council. More than 100 kilograms (3,527 ounces) of gold was stolen in 2019 as bullion rose to a five-year high, although not all companies disclose their losses, said the council, which represents the nation’s largest miners.The attacks are part of a wave of violent crime. Murders in South Africa climbed to the highest in a decade, with an average of more than 50 people killed each day. Violent robbery has surged and last year President Cyril Ramaphosa’s government deployed the army in Cape Town to quell gang-related killings.Ramaphosa has made combating crime a top priority since taking office in one of the world’s most unequal societies in 2018. While the violence is partly a legacy of apartheid rule that ended in 1994, his efforts have been hindered by the gutting of the National Prosecuting Authority and other law-enforcement agencies under his predecessor Zuma.“The fundamental problem is police are not getting on top of organized violent crimes,” said Gareth Newham, who heads the justice and violence prevention program at the Institute for Security Studies in Pretoria. “We are seeing a deterioration in our policing capacity.”After meeting with gold mining companies in October, Minister of Police Bheki Cele is considering plans to set up a task force to tackle the violence, said Lirandzu Themba, a spokeswoman for the ministry.When 50 robbers overwhelmed security at Gold One International Ltd.’s smelting plant in May, the police held back from engaging with the gang after they were fired on, according to Jon Hericourt, vice president of operations at the Chinese-owned miner. Since the gang made off with an unspecified quantity of gold, the police have only provided scant information on its investigations, he said.Gold One has beefed up security and switched its focus from thwarting internal theft to combating all-out assaults. Still, Hericourt doubts that will be enough.“It’s not a mining company’s job to take on gangs like this, it’s the government’s job,” he said.Sibanye has also strengthened its defenses after the nation’s biggest gold producer repelled several attacks last year, said Head of Security Nash Lutchman. Combat training is now standard practice for guards, who wear bulletproof jackets and patrol in armored vehicles at night.Still, their shotguns and 9-millimeter pistols can’t compete with the automatic weapons used by gangs. The raids take months to plan, with the gangsters coercing mine employees into providing inside knowledge, Lutchman said.“It’s military precision in terms of planning and execution,” he said. “No smelting plant is going to have sufficient manpower and fire power to defend an onslaught from 20 or 30 attackers.”In the final quarter of 2019, both Harmony Gold Mining Co Ltd. and DRDGold Ltd. suffered fatalities during assaults.The attacks are putting additional pressure on South Africa’s 130-year-old gold industry, forcing companies to increase spending at often marginal mines that were already battling against incursions by illegal miners. That’s compounding the geological challenges of the world’s deepest mines, deterring investors already concerned by the country’s power-supply crisis.“It can potentially have a knock-on effect to potential investors as well because they are not going to invest in gold in South Africa because it’s too risky,” said Gold One’s Hericourt.\--With assistance from Samuel Dodge.To contact the reporter on this story: Felix Njini in Johannesburg at firstname.lastname@example.orgTo contact the editors responsible for this story: Lynn Thomasson at email@example.com, Dylan Griffiths, Antony SguazzinFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Announcement of Periodic Review: Moody's announces completion of a periodic review of ratings of Harman International Industries, Inc. New York, October 29, 2019 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Harman International Industries, Inc. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.
Moody's Investors Service ("Moody's") upgraded Harman International Industries, Inc.'s ("Harman") senior unsecured rating to Baa1. Moody's increased the rating uplift related to the Samsung Electronics Co., Ltd. ("Samsung," Aa3, stable) ownership to two notches, raising Harman's senior unsecured rating to Baa1. The increased ratings uplift reflects the greater strategic coordination of Harman's operations into Samsung over the past year, particularly in the Connected Car segment, utilizing Samsung's displays in Harman's automotive infotainment systems, and in Lifestyle Audio, pairing Harman's AKG earbuds with several generations of Samsung Galaxy smartphones.