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-Dont Give Up On Gold!

Casual observers of gold typically fall prey to the simplistic notion that fear is the primary motive behind decisions to acquire gold exposure. The only times I have observed fear among gold investors have been during the periodic corrections that test their confidence in the long-term bull market trend, tempting them to sell into weakness. Because the early 2012 rally that preceded the "Leap-Year Gold Massacre" was so short-lived, following as it did a prolonged period of weakness in the second half of 2011, the latest breakdown is a source of understandable frustration for gold investors. The related mining equities have been underperforming for quite some time, and lately it seems they've been producing more disappointment than gold. Major asset writedowns have hammered Kinross Gold (NYSE: KGC ) and Newmont Mining (NYSE: NEM ) , and severe cost inflation has challenged even the large-scale development projects at Barrick Gold (NYSE: ABX ) . More recently, the charts have turned uglier still, opening the possibility that gold and related equities could be in for a bit more near-term weakness before staging another reversal. Furthermore, as the financial world ebbs and flows with each change in the perceived likelihood of additional quantitative easing by the Federal Reserve, some gold investors will undoubtedly throw in the towel. Gold falls prey to unfounded pessimism. Courage and conviction are required to stand strong with gold exposure in the face of dramatic declarations like letterwriter Dennis Gartman's recent assertion that the gold bull market ended all the way back in August of 2011. Interestingly, in the days following the Feb. 29 collapse in gold that so impaired the near-term technical landscape, Gartman himself pondered "the prospects that something manipulative and perhaps even nefarious took place Wednesday in the gold market." John Embry, chief investment strategist at Sprott Asset Management, slammed Gartman's bearish call in an interview with King World News, stating: "Given Dennis's unbelievably inept record at calling the gold price, in both directions, I regard this event as wildly bullish." Of course, I am convinced that Gartman's grossly premature call will suffer the same fate as Nouriel Roubini's claim in 2009 that "those people who delude themselves that gold can go to $1,500 or $2,000 are just talking nonsense." At the time, I took Roubini to task for what I considered his "worst call ever" and encouraged my readers to instead heed the bullish outlook offered by Jim Rogers. History has already settled that score, but the exercise provides a timely reminder for investors to reassess their resolve in response to the busted sentiment, intimidating headlines, and unfriendly charts that periodically test the mettle of long-term gold investors. With much attention heaped upon the bearish perspectives of late, I will present below a set of opinions that underscore the resiliently bullish long-term outlook for gold.

Commodity guru Jim Rogers remains resolute in his bullish long-term outlook for gold and silver, indicating last week that he intends to buy more on any further price weakness. While anticipating some additional near-term decline in prices, Rogers approaches the pullback with the opportunistic perspective that I consider paramount to successful navigation of bull markets as inherently volatile as those for gold and silver. According to newsletter writer Richard Russell, China is operating under a similar strategy. Russell referred last week to a "Chinese put" under the gold price, adding: "China is moving in to scoop up gold on any gold weakness. At the low 1600s and below 1600 -- it's 'enter the dragon.'" Economist Marc Faber has identified two "huge bubbles" -- one in U.S. public spending and government debt, and another in "the wealth and the income of the super-wealthy" -- but he vehemently resists the notion that gold is a bubble. Faber appears utterly unfazed by the recent weakness in gold: For the last 40 years in my business I've seen people always lose money when they put too much money into something and then it goes down. They panic and sell, or they have a margin call to sell -- and lose money. I own gold. It's my biggest position in my life. The possibility of the gold price going down doesn't disturb me. Every bull market has corrections. And then there are the banks, which are finally adapting to the new reality of gold after failing to prepare their clients for the initial stages of the monetary metal's ascent. Morgan Stanley reiterated its bullish outlook, stating: "We believe that the recent weakness in gold is a good entry point as some elements of the recent selling pressure appear to be at odds with the FOMC's still-dovish position." Standard Bank expects an average gold price of $1,790 for 2012, which would imply substantially greater strength during the second half of the year than we have seen thus far. Japanese firm Nomura characterized its price forecast for $1,791 in 2012 and $2,063 in 2013 as being "in line with consensus estimates." BNP Paribas is substantially more bullish, targeting average prices of $1,850 for 2012 and $2,225 for 2013. Goldman Sachs recently issued a buy recommendation for gold with a six-month price target of $1,840 per ounce. Deep value in quality miners is a safe haven while awaiting QE3 For many gold investors, the doubt that periodically sets in revolves around dynamic projections regarding the likelihood that the Federal Reserve and other key central banks will engage in further accommodative policy intervention through some combination of liquidity injections, zero-bound interest rates, quantitative easing, etc. That's a topic for another day, but I think PIMCO cofounder Bill Gross summed it up nicely last week when he tweeted: "Central banks are where bad bonds go to die. Without QE, the financial markets & then the economy will falter."

Because I am as convinced today as I have ever been that gold will trade to $2,000 per ounce and well beyond, and given the extreme undervaluation I perceive among a broad swath of the related mining equities, I remain steadfastly invested in the space. The standout bargains are frankly too numerous to mention, but Primero Mining (NYSE: PPP ) remains a strong favorite of mine. Of the larger producers, Goldcorp (NYSE: GG ) is the first coin I would stash in my pot of gold. I have issued bullish CAPScalls for both stocks and selected them as top picks within my Motley Fool CAPS portfolio. I am 100% unshaken by this latest corrective phase, and I believe quality gold-mining equities at current valuations will someday be seen as one of the great market opportunities of our era. Looking for more ideas? Download The Motley Fool's special free report, "The Tiny Gold Stock Digging Up Massive Profits." Our analysts have uncovered a little-known gold miner that we believe is poised for greatness. Find out which company it is and why we strongly believe in its future -- for free!

Add Goldcorp to My Watchlist Add Primero Mining to My Watchlist Add Newmont Mining to My Watchlist Add Barrick Gold to My Watchlist Add Kinross Gold to My Watchlist

Dont give up on gold just yet

March 12, 2012, 4:00 PM

Gold appears to have lost its steam, with prices trading slightly lower for the month so far, after a disappointing 1.7% loss in February, but Dillon Gage Metals expects prices to reach new heights later this year. Gold prices weakened Monday. April gold futures GCJ2 +0.15% $1,699.80, down $11.70, Monday. closed at

A strengthening safety net for Europes debt crisis and improving economic conditions outside Europe could dampen investors interest in acquiring gold for now, said Terry Hanlon, president of Dillon Gage Metals, in a press release Monday. But other factors are supportive for the yellow metal, he said, adding that geopolitical conditions, most notably tensions in the Middle East, will continue to buoy gold and crude oil prices this year. Hanlon highlighted data showing strong global gold demand last year and rising purchases from central banks.

Global gold demand reached 4,067 metric tons in 2011 to reach a record annual value for gold demand of $205.5 billion 29% above the 2010 value, according to recent statistics from the World Gold Council. Central banks continued to be net buyers of gold, with purchases by central banks growing to nearly 440 metric tons last year, from 77 metric tons in 2010 and gold used in global electronic also rose 1.1% in 2011, the WGC reported in mid-February. I look for gold to advance in 2012 and to take out its 2011 peak at $1,895 an ounce, Hanlon said. I expect the 2012 high to be made in the latter part of the year, as it was in recent years. Gold may be able to reach a record $2,000 or $2,100 an ounce then. It's been a rough road for gold and silver investors lately, and the thoroughly distressed valuations pervading the related production and exploration entities is enough to try the patience of even the most seasoned market participants. I am here to remind Fools that the purpose of a corrective pause in a long-term bull market is to periodically shake-out the weaker hands, and as long-term investors we never want to play that role. My longstanding readers will recall my discussions of the 2006 gold correction, which struck a short time after I increased my precious metal allocation from somewhere around 40% to roughly 70%. I recall feeling an odd sense of relief when I sold some positions into weakness to place a limit on my losses, but ultimately I ended up buying back some of those positions at higher prices as my ongoing research and developing understanding of the fundamental outlook enhanced my confidence in the inevitability of the next major breakout. The lessons learned through that experience served me well during the 2008 crisis and associated collapse of the precious metals and their equities. I watched with unbroken confidence in the long-term bull market as that brutal correction erased more than half my portfolio's market value and sent my CAPS score careening from the top to the bottom of the pack. I learned a different lesson during that chapter, which was to always build a cash position into strength so that I would never again be forced to watch a stock like Silver Wheaton fall to $2.51 per share without having the means to average down into my position. The current correction in gold and silver has put all these lessons into practice, though the brief nature of the early-year rally only permitted a modest accumulation of cash reserves, and they have mostly been reinvested at this juncture. But since every stock purchase of late has been accompanied by a feeling of deep satisfaction at the values thus obtained, I have no regrets for having essentially depleted my cash reserves here. Physical buying is very strong beneath $1,650, and would only get stronger if gold were to test the $1,550 to $1,600 range (which I am not saying will happen). Because of the technical

damage imparted by the recent break below $1,650, any failure to recapture $1,680 in short order does indeed keep the $1,550 to $1,600 range within the realm of possibility. I do not consider anything beneath $1,500 even remotely possible, and I consider it far more likely than not that the $1,600 level will hold. I wrote the following article for you, my community of fellow gold and silver investors here on CAPS, to offer an encouraging word of reassurance during a period of weakness that has rattled the confidence of many gold and silver investors. I encourage you to see straight through the noise portraying reluctance by the FED to engage in further QE, and to understand instead just how inevitable further easing remains given the prevailing circumstances. I intend to write a follow-up piece specifically on that point, but rest assured that further easing will come from the FED. Additional measures of an unappetizing scale will likewise be forced upon the European continent. None of these measures will solve the underlying structural deficiencies infecting the global financial system, but rather will only buy the central banks some time. While a few good reasons exist behind the dramatic underperformance of the precious metal equities to date, for the most part I believe that prevailing valuations are a result of unjustified indifference toward the industry by financial markets that have still not internalized the full scope and longevity of the ongoing bull market trend. The time will come when gold and silver do begin to exhibit characteristics of a maturing bull market through the increased participation of investors, and because that is likely to occur in the midst of a meaningful breakout in the underlying metal prices, the corresponding appreciation in the quality shares out of such a deeply impaired state is likely to yield gains on a scale that seems difficult to contemplate while we remain mired here in relative weakness. Rising costs are a problem, but nothing that higher prices can't alleviate. The prolonged nature of this impaired state, furthermore, will feedback into the supply equation as mine supply will not be able to meet growing investment demand without substantial investment capital behind every tier of the equity space. The gold and silver equities have enjoyed a few brief moments of remarkable strength within an otherwise dismal trajectory, and in no way does that experience correspond to the end-stages of bubblemania that some bears wrongly perceive in gold. We have not only a complete absence of speculative froth in the equities, but a longstanding indifference that points to the opposite extreme. Meanwhile, the more noteworthy speculative froth in the paper gold and silver markets occurs on the short side. Until we find long-side commitment on a scale to match the price-crippling shorts, we will not have even reached the maturing stages of a secular bull market. In the meantime, savvy market participants, including sovereign banks in China and elsewhere, continue to

offload physical supply while the high-frequency circus continues with its paper games. So stand strong with gold and silver. I stand with you. Don't let up on the discipline that keeps you intent on permitting only the most attractive and most carefully vetted companies into your portfolios. Remember the feelings you feel in the midst of this correction, as that memory will serve you well the next time gold enters another inevitable corrective pause. When we do finally get a breakout, remember to raise some cash into strength in preparation for the next pause. That cash position makes all the difference between mere frustration and despair. $2,000 remains an absurdly conservative price target for gold, but one that I retain nonetheless until such time as we strike through it. Until then, and in fact for some time beyond, please, don't give up on gold.

How to Purify Gold

Purifying gold Before gold is sold on the market, it has to go through a purification process. This process is quite complex and dangerous. It needs to be done under the right circumstances and with the utmost care in safety precautions. It is not recommended to try this process unless you have experience working with harmful chemicals.


Prepare your beakers. Place your gold ore into one of the beakers. In your second beaker, mix three parts hydrochloric acid to one part nitric acid. Be very careful when mixing your acids, as both are quite toxic and can be dangerous. Be sure that you are also wearing protective eye wear as well as gloves that can hold up against acid.

2 Mix your acid beaker with your ore beaker and simmer. Be careful to do this quite slowly and carefully. Once you have combined your two beakers, simmer the mixture on a hot plate until all of the nitric acid has been boiled off. If most of the liquid evaporates before the nitric acid is gone, you can add a small amount of hydrochloric acid to keep the ore covered in liquid.

3 Filter the solution. Use a strainer to filter off any of the solid that may be left from the boiling process. Do not dispose of the solid without first treating it with a solution, such as lime juice, to neutralize it. After you have strained out the solid, add equal amounts of distilled water, as there is liquid in the beaker.

4 Check for silver. Before you can extract the gold, you must first extract any silver that may be present in the ore. Slowly drop small amounts of the un-iodized salt into the mixture. This should cause little white particles of silver chloride to drop to the bottom of the container. You can then use a coffee filter to strain out the liquid from the silver particles. Set the silver aside. Be sure to keep the liquid that you have strained off because it still will contain the gold.

5 Check for gold. Put the remaining acid mixture back into a beaker. Slowly add sodium sulfite to the mixture. This will cause the gold to continue to add the sodium until the gold stops moving to the

bottom of the beaker. Filter the solution again using a coffee filter. Rinse and dry the filter containing your gold.

6 Heat the gold. Now that you have your separated gold, put the filter into a clay crucible and set the filter on fire to get rid of it. Cover the gold and the filter with borax and place it in a furnace that is capable of reaching temperatures of 2,000 degrees F until the gold is smooth. Pour into a mold and let it cool.

Tips & Warnings

These chemicals are very dangerous. Mixing them wrong or inhaling their fumes will not only hurt you, but some can even kill you if ingested. Take every precaution possible and do not attempt this process unless you are an experienced chemist or goldsmith.

How to Refine Gold

Refining gold

There are several things you will need in order to refine gold. Be sure to have everything at hand and that you have a large enough area to work. You may want to do this on a long table outside where you will get plenty of ventilation. The odor can sometimes be rather suffocating, especially if you try do this in a closed room.

Things You'll Need

Rubber gloves Goggles Rubber apron

Instructions 1.

1 Put your gold in a container. For every ounce of gold, you will need a container that is the size of 300 milliliters. Add nitric acid to the gold in the container. For every ounce of gold, you will add 30 milliliters of nitric acid. Then let it sit for at least 30 minutes.

2 Add 120 milliliters of hydrochloric or muriatic acid for every ounce of gold in the container. The mix will turn brown and become very hot. You will want to wait at least an hour before filtering the acid. You could wait overnight for this part.

3 Pour the mixture into another container by filtering any particles that could contaminate the gold. The acid will become a clear emerald green color. If it isn't clear and it appears cloudy or musty, re-filter the mixture.

4 Take a quart of water and boil it. Add 1 pound of urea, which is used to adjust the pH level of the acid. Slowly add the water and urea mix to the acid. The acid will foam, so don't add the mix too quickly, otherwise it could overflow and you could lose some gold. Once the acid stops foaming, stop adding the water/urea mix. You will have raised the pH level from .1 to 1.0. This kills the nitric acid, but not the hydrochloric acid.

5 Take another quart of water and boil it. Add an ounce of storm precipitant for every ounce of gold in the container. Add this solution to the acid slowly to prevent overflow. The acid will change to a muddy color. Particles of gold will be forming in the water. Wait 30

minutes, then test the acid for any presence of dissolved gold. Use precious metal detection liquid in order to detect dissolved gold so that none is thrown away.

6 Pour the acid into another container by filtering. You will have what looks like mud on the bottom of the container and you do not want to pour this out. This is gold. Once you poured out all of the acid, add water to the mud and stir. Take the muddy particles out of the container and proceed to rinse three to four times and then pour aqua ammonia on the gold. White vapors will the appear and you will need to rinse again and then let the gold dry.

How to Refine Gold With Nitric Acid

Chemical refinement is a common way of increasing gold purity.

As valuable as pure gold is, gold is rarely pure. Gold ore found in the ground is bound to other (often undesirable) minerals, and even refined gold used in jewelry often has contaminants in it. While nitric acid alone can dissolve some unwanted minerals (such as pyrite) from gold ore, it is unable to penetrate large gold bodies or refine relatively pure gold. Aqua regia -- a mixture of nitric acid and hydrochloric acid -- can dissolve gold itself, allowing pollutants to be filtered off so that very pure gold can be extracted as a precipitate. Instructions 1. Dissolving and Filtering Gold

1 Put on safety goggles, rubber gloves and a rubber splash apron. Choose a work station in a well-ventilated area -- either under a fume hood or an isolated location outdoors.

2 Determine the weight of the gold product in ounces -- you will need a Pyrex beaker with 300 milliliters of capacity for every ounce of gold. Put the gold in the beaker and carefully add 30 milliliters of nitric acid for every ounce of gold. Allow the acid to sit for at least 30 minutes -- avoid inhaling any fumes emitted by the acid.

3 Add to the beaker 120 milliliters of hydrochloric acid for every ounce of gold -- the mixture will get very hot as the gold begins to dissolve. Allow the beaker to sit undisturbed overnight to ensure that all of the gold is fully dissolved. Strain the acid through a Buchner filter funnel to remove particles of undesirable minerals -- repeat until the acid is a transparent green color. Pour the acid into a larger Pyrex container.

4 Boil one quart of water and remove it from its heat source. Mix one pound of urea with the water. Pour the mixture -- very slowly and carefully -- into the acid until it stops foaming.

2. Retrieving the Purified Gold o 5 Boil one quart of water and remove it from its heat source. Add to the water one ounce of precious metal precipitant for every ounce of gold -- do not inhale any fumes produced by the solution.

6 Add the solution to the acid -- very slowly -- this will cause the acid to become a brownish color as the dissolved gold binds to the precipitant. Allow the acid solution to sit for at least 30 minutes.


Dip a stirring rod into the acid solution and dab the end of the rod onto a paper towel. Apply a drop of a precious metal detection liquid to the spot on the paper towel -- if the liquid becomes a dark purple color, then gold is still dissolved in the acid and the solution should be given more time to work. Test the solution again after another 30 minutes -- if gold is still detected, then add additional precious metal precipitant solution to the acid. Repeat until the detection test comes up negative.

8 Run the acid solution through a Buchner filter funnel to extract the brown particles of gold and put the remaining acid solution aside for later neutralization.

9 Put the brown gold particles in another Pyrex beaker. Cover the particles with tap water and stir them thoroughly. Strain the water through another filter -- put the brown gold particles in another beaker and set aside the water for later disposal. Repeat this process several times.

10 Pour a small amount of aqua ammonia on the gold particles to remove lingering impurities and neutralizing any remaining acid on the particles. Filter strain the gold particles from the aqua ammonia. Rinse the particles with distilled water and filter strain them one more time.

11 Add a small amount of distilled water to the gold particles and pour them into another Pyrex beaker -- make sure to get all of the gold particles out of the original beaker before putting it aside. Put the beaker on a hot plate and turn it on to boil away any remaining water and dry the gold particles.

12 Melt the gold particles and cast the now-pure gold however you wish.

3. Neutralizing the Acid o 13


Pour a large amount of water (at least twice as much water as the combined acid volume) in a large plastic bucket. Add sodium bicarbonate (baking soda) to the water until the water is completely saturated and a pile of baking soda is seen at the bottom of the bucket. Stir the mixture thoroughly.

14 Pour the water that was used to distill the gold particles into the bucket to neutralize any lingering acid that may be present.

15 Pour the remaining acid into the bucket very slowly and carefully -the mixture will heat up and fizz, possibly violently. Add additional baking soda if the mixture continues to fizz after pouring all of the acid.

16 Wait until the mixture is no longer fizzing and drain. Flush the drain with copious amounts Rinse all of the beakers and equipment that contact with any acid (nitric, hydrochloric, or regia) thoroughly and with caution. then pour it down a of water afterward. may have come in the combined aqua

Tips & Warnings

Be careful when melting the gold particles -- you don't want the force of a torch blowing them around. Melt them in a secure crucible or metal-melting pan. Use extreme caution when handling nitric acid, hydrochloric acid and the combined aqua regia -- all three can produce hazardous fumes and all three can cause severe burns upon exposure to eyes or skin. Use safety equipment at all times when handling these acids. Do not dispose of any acid without neutralizing it first. When mixing water and acid, always add the acid to the water -- never add water to acid. If a violent reaction occurs, it is better to be splashed by water with a small amount of acid in it than acid with a small amount of water. Use caution when using hot plates -- always assume that a hot plate is hot. Turn off and unplug a hot plate after use.



Gold is purified through a process of high temperature heating or chemical exposure, depending on the purity of the mined gold, according to

Initial Processing of DifferentTyes of Ore


If the gold is a low grade ore, then it is broken up into chunks that are then put in carefully lined pads and treated with a dilute cyanide solution, which dissolves the gold. For high grade ore, the metal is sent to a grinding mill and made into a powder. Refractory ore contains carbon and is heated to over 1000 degrees F, which removes sulfide and carbon. The resulting oxide ore is directed to the leaching circuit. Sulfide refractory ore that contains no carbon is oxidized in an autoclave to free gold from sulfide minerals, then it is sent to the leaching circuit. Sponsored Links Gold processing plant Got ISO9001:2008/SGS Certificate. All Mineral Processing Equipment.

Further Refining

At this point, treated high grade ore is leached with cyanide and gold is collected onto activated carbon with the cyanide solution being recycled. The gold-carbon mixture is put in a vessel where the gold is removed chemically. The carbon is then recycled. The gold is then extracted from the solution by electrolysis or chemical substitution.

Purifying the Gold


At this point, the gold is melted into dore bars composed of 90 percent gold. The bars are then sent to an external refinery to make them 999.9 parts per thousand pure gold.

Other Means of Refining Gold


According to Hoover and Strong, a refiner and manufacturer of precious metals, they produce 98 percent pure gold using the Miller process. After a sample of treated impure gold has been tested in a lab for purity, the gold is melted in a furnace, then chlorine is bubbled through the liquid. The chlorine attaches to elements in the gold that then become solid and move toward the top of the furnace.

They are skimmed off. Electrolysis is ultimately used to purify the gold.

The Role of Gold in Modern Society

Gold mining's value to developing countries Gold mining is vital to the fragile economies of many impoverished countries, which account for roughly two-thirds of global gold production. In addition to generating export revenue in these countries, gold production provides royalty and tax income to their governments, technology transfer, worker training and the creation of a skilled workforce. Gold mining can also bring substantial improvements in physical, social, legal and financial infrastructure. In many of these countries, gold mining is a foundation industry that often provides the critical mass for the development of electricity, water, road and rail transport in a region, that are the essential foundations of an economy. Developing countries accounted for 72% of global output in 2004. Most of this came from low-income or lower-middle-income countries that together accounted for two thirds of global output. The strongest rise in output has been seen in Heavily Indebted Poor Countries (HIPCs), whose gold production rose by 84% between 1994 and 2004. Of the 38 HIPC countries, 14 are significant gold producers with lesser or minor production in at least another 14 countries. There is potential for substantial additional production in several other countries. The rise in HIPCs' output has been paralleled by rising export dependence on gold. In 2003, gold accounted for 13% of goods (merchandise) exports of the 14 significant producers and 10% of their exports of goods and services. For HIPCs as a group, gold accounted for nearly 8% of goods exports and over 6% of exports of goods and services. It is one of the most important exports for HIPCs. Gold is the leading export for Mali (59% of goods exports in 2003), Tanzania (44%), Ghana (32%), Guyana (26%) and the second most important for Guinea (23%). A $10 fall in the gold price would cause a loss of around $75m in HIPCs' export income. For the 27 HIPC countries that have reached decision or completion point (those that receive at least some debt relief under the HIPC initiative), gold exports in 2003 amounted to 87% of debt service payments.


Gold is equally important to other low-income countries that are not HIPCs. Among those considered by the World Bank to be severely or moderately indebted, gold is the leading export for Kyrgyzstan (around 45% of total goods exports in 2003) and Papua New Guinea (36%), the second most important export for Mongolia (20%) and Zimbabwe (11%) and one of the two leading exports for Uzbekistan. Among lower-middle-income countries, gold is the leading export for both South Africa (13% of goods exports in 2003) and Peru (17%). Gold mining companies source supplies locally where possible and employ local labor where possible. Thus, even allowing for some necessary imports and for the remittance of profits and dividends, their impact on a developing country's balance of payments is strongly positive. Gold mining, and metals mining generally, is essentially free of the distorting subsidies applied by some developed countries to agricultural production. Export revenue is not the only benefit gold mining brings to a developing country. It provides royalty and tax income to governments, technology transfer, skilled employment and training for local populations, together with further jobs through the multiplier effect. In one or two cases it has provided the foundation for a significant jewelry manufacturing industry. Gold mining can also bring substantial improvements in physical, social, legal and financial infrastructure. The establishment of a formal mining industry can be the first step in a country's industrial development. Mining is a foundation industry that often provides the critical mass for the development of electricity, water, road and rail transport in a region. This characteristic of the industry is particularly important in Africa where lack of infrastructure has been identified as one of the major hindrances to economic development. Gold is often thought of as synonymous with wealth. Yet gold coins, bars and high-carat jewelry play a crucial role as a means of saving and defense against misfortune to many of the poor of the world. Similarly gold mining brings benefits to poorer nations. It will continue to have a role to play in fostering economic development. Gold's value to consumers and investors in developing countries In much of Asia, the Middle East, and the Indian subcontinent, gold is the best possible protection against upheaval, both political and economic. For men and women throughout the developing world, gold is still one of the most liquid and widely accepted forms of exchange, quite simply the most efficient store of value they possess. Around two thirds of the jewelry purchased in the Middle East and Asia is used as a means of saving in addition to its function as an adornment. The use of jewelry as savings is often important in rural areas where access to a reliable and appropriate banking system is difficult or impossible. Gold also


offers protection against a weak currency or high domestic inflation levels, which are prevalent and persistent problems in the developing world. Around two thirds of all jewelry manufacture takes place in the developing world and the proportion is rising. Countries such as Turkey, India, China and Thailand have all seen their exports to developed countries rise in the last few years, generating export earnings and employment. Gold jewelry sales to tourists are also important for Turkey, Egypt and Dubai. While inflation has essentially been non-existent until recently in most developed countries, in many developing countries, inflation and the attendant currency depreciation have been rampant, causing hardship to millions, if not billions, of people. The US dollar price of gold did not perform well for 20 years from 1980 to 2000, but gold was an excellent investment in terms of for, example, the Indian rupee, the Turkish lire, or the Vietnamese dong. Where men and women do not have easy access to liquid markets in company stock or government bonds, to US dollar bank accounts, or even any bank account at all, gold has proved over and over again to be the most valuable financial asset to own. For example, in Vietnam, gold plays an important role in the purchase of a home. Buying a home in Vietnam takes time, as is the case in most countries. From the moment a buyer and seller agree on a price to the day the paperwork and sale are completed takes a month or longer. During this time, the value of the Vietnamese currency may have fallen sharply, as the current rate of currency depreciation in that country is very rapid. Accordingly, the buyer will arrange financing with a bank not in terms of the Vietnamese dong, but in gold, which holds its value in terms of purchasing power. This arrangement means the buyer will still have enough to pay the agreed price when the sale is consummated. Gold's value to women living in developing countries In the Middle East and the Indian sub-continent gold plays an important role in the financial security of women. Historically, jewelry was often the only asset a Muslim or Hindu woman could own in practice, and in more traditional families this is still very much the case, especially in rural areas. A woman's gold can therefore be her only protection against personal misfortune. Hence, the practice of giving an Indian bride gold, which is considered Streedhan, or "property of the woman". India is the world's largest market for gold jewelry, accounting in 2004 for one fifth of the global total. Gold's important role in society's long-standing customs Gifts of gold make a vital contribution as tokens of love and precious souvenirs on those emotional occasions that bring people together - weddings,

anniversaries, birthdays, Christmas and other religious holidays, graduations, Mother's Day, birthdays, religious ceremonies such as baptisms, and many more. Gold's function as an adornment, as jewelry, has been in existence for over 6,000 years. The earliest gold jewelry dates from the Sumerian civilization that flourished in the fertile basin between the Tigris and Euphrates rivers around 4,000 BC. Why is gold so coveted? Since the beginning of time, the intrinsic beauty, warmth, sensuality and spiritual richness of gold has earned it pride of place as the favorite metal of jewelers. Gold has inspired craftsmen to create objects of desire that unite us with our emotions. In the Middle Ages, alchemists attempted to use their magic to make gold from other metals. They believed that gold was a source of immortality, and so it was used in medicines designed to fight old age and prolong life. Today, consumer demand for gold jewelry is growing by over 20% per annum, demonstrating the confidence that women around the world have in gold. This level of demand far outstrips the supply for gold that mines can produce. Gold as a preserver of value (inflation hedge, safe haven, etc.) Gold is an effective hedge against inflation. In addition, gold is inversely correlated to the US dollar, making it a good currency hedge. As an asset class, gold has all the advantages of being universally regarded as a currency, without what are all too often the disadvantages of being subject to the economic and monetary policies of one particular country's government. Gold's value as an effective portfolio diversifier Gold is a highly effective portfolio diversifier due to its low to negative correlation with all major asset classes. Over the last 20 years, gold has shown no statistically significant correlation with equities. That applies not just to domestic US equities, but also to international equities, including those traded in London, Tokyo, Frankfurt, and so on. Gold has also shown no statistically significant correlation with other mainstream asset classes, such as US Government bonds, Treasury Bills, and equity real estate investment trusts. The fundamental reason for this lack of correlation is that the factors driving the gold price are not the same as the factors that determine the returns on other assets. Obviously, there are some economic factors that influence the performance of all investments. But equally obviously, changes in gold supply and demand have no influence over the other asset classes.


As a rule, gold shows no statistically significant correlations with mainstream asset classes. However, there is evidence that when equities are under stress, in other words when shares are falling rapidly in value, an inverse correlation can develop between gold and equities. And this aspect of gold's behavior runs directly counter to the way other asset classes perform in stress situations. Gold's value as a currency reserve Gold is still considered an important reserve asset by most central banks, even though it is no longer the center of the international financial system. The most important reason is that gold is the only reserve asset that is no one's liability. This means that, unlike a currency, the value of gold cannot be affected by the economic policies of the issuing country or undermined by inflation in that country. Gold has a track record of holding its real value over the centuries. Since gold is no-one's liability, it can not be repudiated and holding it is a safeguard against potential unforeseen crises. Gold also brings much needed diversity to a central bank portfolio due to its low correlation with key currencies and its strong inverse correlation with the US dollar. The central bank of Argentina, for example, when diversifying a portion of its reserves away from 100% reliance on the US dollar in 2004, included gold in its purchases. Gold accounts for 9% of reserves held by central banks (valued at market prices). Gold's value in industrial applications Gold ranks among the most high-tech of metals, performing vital functions in many areas of everyday life. Gold's unique properties make it useful in medical applications, pollution control, air bags, mobile telephones, laptop computers, space travel, and many other things we consider indispensable to our modern lives. Approximately 12% of demand for gold comes from industry. Medical Applications Because it is "biocompatible", gold plays an important role in medical implants. For example, gold-coated "stents" are inserted into clogged arteries to clear the flow of blood. Also, because gold is opaque to x-rays, surgeons are able to place a stent with the utmost precision, which helps ensure optimal effectiveness. Other medical implants that contain gold are pace makers and insulin pumps. Gold is used in these devices because of its high level of reliability in micro electronics. Gold possesses a high degree of resistance to bacterial colonization, and because of this it is the material of choice for implants that are at risk of infection,


such as the inner ear. Gold has a long tradition of use in this application and is considered a very valuable metal in microsurgery of the ear. Gold is being used increasingly in pharmaceutical applications. Gold is ideal for delivering biologically active materials directly into the target tissues in the human body, without damaging the tissues themselves, or altering the biological activity of the material being delivered. Gold helps doctors to deliver precise doses of powerful drugs to the parts of the body where they are required. This is important in the treatment of a range of diseases, including cancer and HIV, the virus that causes AIDS. On the molecular level, gold has applications through its organic and chemical compounds used in medical science: for instance, anti-cancer drugs. Or in what doctors have started to describe as a "pharmacy on a chip" - a tiny covering of gold is used to encase micro doses of drugs on an electronic chip that is implanted in the body. When the chip is electronically activated to dissolve the tiny casing of gold, an appropriate dose of drug is released. In a similar way, gold is the preferred material for a branch of medical research the scientists call "biolistics", because it is a marriage of biology and ballistics. Strands of DNA are blended with microscopic gold powder and injected into the skin in search of targeted cells, so that the researchers can observe the reaction. In this application, three of gold's attributes are crucial: first, its nonreactiveness. Second, the fact that it is opaque means it can be precisely located, just as with the stents. And finally, the fact that gold is dense - it has a high ratio of mass or weight to volume - means the compound can achieve the high speed required to penetrate the targeted cell. Environmental Applications Recently, it has been discovered that gold nanoparticles, measuring only 25 nanometres across, can split oxygen atoms, thereby facilitating oxidation reactions, which create useful organic products as oxygen atoms and carbon compounds combine. New research published in the top scientific journal Nature has revealed that gold catalysts can clean up an important chemical process that is used every day to produce tons of pharmaceuticals, detergents & food additives. As a chemical catalyst, gold is playing an important role in new environmental applications, such as pollution control (mercury emissions) and fuel cells. By way of example, the Institute for Green Technology in Tokyo has 30 scientists working on gold catalysts for environmentally sensitive, or "green", technology applications.


To give you an idea of the importance of catalysis, it has been estimated that about one trillion dollars of the Gross Domestic Product of the United States is derived from processes that use some form of industrial catalysis. In recent years, catalysts using gold have become a very hot topic of research. There have been breakthroughs in research studies that have shown gold to be an excellent catalyst in a number of important chemical reactions. Some of the potential applications include:

Pollution control in diesel-powered vehicles, and in the environment; Clean energy generation, by means of fuel cells; Sensors, for detecting gases in industrial processes; And as catalysts for chemical and petrochemical processes. Gold may lead to new routes for the manufacture of many vital chemicals.

Other Applications The standard touch-tone telephone would not function without the 33 contacts made from gold it contains. Air bag systems fitted in more than 30 million cars around the world rely on gold-coated electrical contacts. And every time you touch a key on your computer it strikes a gold circuit that relays your command to the computer's microprocessor. Gold is one of the most effective conductors of electricity known to man, and its reliability compared with other metals such as palladium or copper is increased by the fact that gold is also an excellent conductor of heat. Gold is also inert and, therefore, does not react when it comes into contact with other substances. In addition, Gold does not corrode or tarnish, so it is much more reliable than other metals in electronic applications.

Gold Production & Refining

The top three gold producing countries in the world are South Africa, the United States and Australia in that order. According to the U.S. Geological Survey, Nevada is the largest U.S. goldproducing state. Other top U.S. gold producing states are Alaska, California, Colorado, New Mexico and Utah. For more statistical information about gold and silver production in the United States: Most gold in the United States is produced at above ground surface (open pit) mines. While mining and production methods vary from location to location. The following is a generic description of how gold is mined and produced around the world at modern operations.

How Gold is Produced This chart illustrates the general steps in open-pit gold mining. The specifics of the process vary from mine to mine.

Geologists use the latest technology, such as satellite surveys and geochemistry, to locate an ore deposit.

Computers are used to design the mine, which requires precise and accurate measurement of the ore deposit. Construction begins following the lengthy process of receiving permits.

Samples of ore are examined to determine grade and metallurgical characteristics. Broken rock is marked by type for efficient processing.

Based on its metallurgical makeup, a dispatcher directs truck operators to deliver the ore to the correct processing location.

Low Grade Ore is roughly broken into small chunks and placed on carefully lined pads where a dilute cyanide solution is distributed over the surface of the heap.

The solution percolates through the heap and the cyanide dissolves the gold. This solution containing dissolved gold is then collected.

High Grade Ore is delivered to a grinding mill, where the ore is pulverized to a powder. Depending on its metallurgical characteristics, the ore may be treated in one of three recovery circuits.

Refractory ore containing carbon is roasted to over 1,000 degrees Fahrenheit, burning off the sulfide and carbon. The product of this process is an oxide ore,

which is routed to the leaching circuit. Oxide ore is sent directly to the leaching circuit where cyanide dissolves the gold.

Sulfide refractory ore without carbon is oxidized in an autoclave to liberate the

gold from sulfide minerals, then it is sent to the leaching circuit. Treated, high-grade ore is leached with cyanide.


The gold is absorbed (collected) out of solution onto activated carbon. The remaining cyanide solution is recycled.

The gold loaded carbon is moved into a vessel where the gold is chemically stripped from the carbon which is then recycled.

Gold is precipitated from the solution electrolytically or by chemical substitution.

The pure gold is then melted into dore' bars containing up to 90 percent gold. Dore' bars are then sent to an external refinery to be refined to bars of 999.9 parts per thousand pure gold. Reclamation is a long-term investment made by every gold mining company, and can cost anywhere from $2,000 to $10,000 per acre. It is the cornerstone of every mine plan and is considered the first and last step of the mining process. (For

more information on reclamation, see the Reclamation section of the NMA Website.) * For information on how gold is used in electronics, telecommunications and medicine, see NMA's gold uses page. * For statistical data on the economic impact of gold production, see NMA's Facts About Gold and Silver. Gold is produced at some mines as part of the process of mining and refining other metals, such as copper. At those operations, gold is refined to an acceptable purity as part of the copper production process. At most gold mines, the gold "dore" is sent to a refinery for further processing.



Chain of Custody
Unlike many other commodities, gold is not sold by the producer to the customer. Rather, gold moves through a number of complex commercial transactions that are depicted in the following chart.

Chart provided by Gold Field Minerals Service.

Laws & Regulations

U.S. gold mining operations must comply with a broad range of local, state and federal laws and regulations that govern how mines are operated and how mined land is reclaimed for other beneficial uses. The General Mining Law (the 1872 Mining Law), which regulates access to federal lands, is specific to metals mining. Requirements affecting environmental performance and public comment, for example, apply to mining as well as the rest of American industry. Most metals mining in the United States occurs in 12 western states, where much of the land is owned by the federal government. This land-covering approximately 700 million acres-is the responsibility of the Bureau of Land Management (BLM)

of the U.S. Department of the Interior. Roughly half of that land is either totally withdrawn or entry, leasing or sale is restricted. Of the remaining land, the BLM or the U.S. Forest Service oversees a variety of federal land uses, including ranching, mining, forestry and railroad rights of way, for example. Recently, the National Academy of Sciences (NAS) evaluated whether metals mining and mined land reclamation should be subject to a uniform set of laws that covered only mining, or if the current system of state and federal laws and regulations was more protective of the environment. The NAS found that because of varying topography and climate conditions, soils composition, processing technology and metals chemistry, it was not possible to develop a uniform set of standards and recommended the current approach as the preferred alternative. For a more comprehensive overview of the laws and regulations governing gold mining in the United States: U.S. Laws and Regulations Governing Gold Mining on Private and Federal Lands MicroSoft Power Point Presentation (PPT), 724 KB For the position of the U.S. mining industry on a national minerals policy and mining law reform

Codes & Initiatives

In addition to compliance with applicable laws and regulations of local, state, regional and national governing bodies, mining operations also have committed to a number of voluntary codes and initiatives aimed at responsible mining practices and sustainable development. While varying in scope, these initiatives integrate environmental, social and economic principles. Mining companies may be involved in one or more efforts based on the countries in which they operate. Here is information on some of the prominent codes of conduct and voluntary initiatives in which gold producers are involved. International Compacts Initiative Global Compact Sponsor United Nations Scope 10 principles. Annual reporting on progress required. Endorsements AngloGold Ashanti Ltd., Barrick Gold Corporation (Peruvian Subsidiary), Newmont Mining


Corporation, Placer Dome Inc. International Cyanide Management Code Six gold mining companies and producers (code developed with UNEP, NGO, labor and financial institutions participation) Best practices and management standards for cyanide use in gold mining. International Cyanide Management Institute finalizing implementation protocols, standards of practice, and certification process. Research project to investigate potential for certification of mining industry based on the 10 principles and 46 elements of the International Council for Mining and Metals (ICMM). Initially focused on Australia. Draft criteria developed, being tested at 5 sites in Australia. Likely to be incorporated into WB safeguard policy and Equator principles. Program being implemented. AngloGold Ashanti Ltd, Barrick Gold Corporation, Kinross Gold Company, Newmont Mining Corporation, Placer Dome Inc, Rio Tinto, CyPlus, DuPont, Orica

Mine Certification Evaluation Project (MCEP)

World Wildlife Fund, Oxfam Community Aid Abroad and other NGO's, organizations and mining companies

BHP Billiton Ltd., Newmont Mining Corporation, Placer Dome Inc, Rio Tinto Ltd and WMC Resources Ltd

Voluntary Principles on Security and Human Rights

US and UK governments, NGO's and mining companies

Freeport McMoRan, Rio Tinto Ltd and Newmont Mining Corporation

Mining Industry Initiatives Initiative Sponsor Scope Status or Endorsements Members of MCA including AngloGold

Minerals Council of

Minerals Council of Sustainability Australia and performance


Australia member companies (MCA) Sustainability Framework

standards. Reporting required. Framework replaces the MCA Environmental Code.

Ashanti Ltd., Barrick Gold, Kinross, Newmont, Placer Dome, Rio Tinto and others @

Global Reporting Initiative

GRI and ICMM Develop mining member companies sector sustainability reporting indicators (Mining and Metals Sector Supplement). Closely linked to ICMM charter principles. Indicators being developed by multistakeholder task force. Mining Association Sustainability of Canada and performance member companies standards. Reporting required. Condition of membership.

Members of ICMM including AngloGold Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @

"Towards Sustainable Mining"

Members of MAC including Barrick Gold Corporation, Kinross, Newmont Mining Corporation, Placer Dome Inc. and others @ Members of NMA including Barrick Gold Corporation, Kinross, Kennecott, Newmont Mining Corporation, Placer Dome Inc. and others @

Sustainable Development Principles

National Mining Commitment to Association (NMA), integrate 20 USA environmental, social and economic principles in mining operations from exploration through reclamation and post closure. ICMM

ICMM Sustainable

Commitment to 10 Members of ICMM high level principles including AngloGold


Development Charter

covering ethics, integrating sustainable development, human rights, risk management, health and safety, environmental performance, biodiversity and land use, product stewardship, community development, and disclosure. ICMM/International Union for the Conservation of Nature (IUCN) Agreement not to mine or explore in UNESCO designated world heritage sites. Plans to discuss other protected areas and biodiversity. Community Development Best Practice Guidance.

Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @

Protected Areas

Members of ICMM including AngloGold Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @

Community ICMM and World Development Bank Good Practice Tools

Members of ICMM including AngloGold Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @ Members of ICMM including AngloGold Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @

Good Practice ICMM, UNEP, DFID Under construction Website and UNCTAD


Emergency ICMM and UNEP Response APELL Project

In Development.

Members of ICMM including AngloGold Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @

Financial Sector Initiatives Initiative Sponsor Scope Status or Endorsements Projects with World Bank or International Finance Corporation funding. Application to other projects through Equator Principles (see below).

World Bank (WB) Safeguard Policies and Guidelines

World Bank and International Finance Corporation

Updates and new safeguard policies or guidelines expected on cyanide, tailing disposal, waste management, closure, ARD and submarine tailing disposal, security and human rights, community roles in monitoring projects, core labor rights, and indigenous peoples rights. Application in developing countries. Policies being drafted by World Bank staff. Incorporates WB safeguard policies for all projects greater than $50 M.

Equator Principles

Major international banks.

Leading financial institutions are signatories to these principles. Program being implemented.

Other Initiatives Initiative Sponsor Scope Status or Endorsements


Extractive Industries Transparency Initiative

UK government along with other institutions (WB etc.)

"Publish what you pay" guidelines developed on payments made by companies to governments. Initial implementation underway. Expected to be included in Mining and Metals Supplement of GRI.

Members of ICMM including AngloGold Ashanti Ltd., Freeport McMoRan, Newmont, Placer Dome, Rio Tinto and others @

International Standard on Social Responsibility

International Standards Organization (ISO)

Developing a standard ICMM monitoring for social responsibility. initiative development Working group and task force to be established to develop standard. Set of business principles to counter bribery and corruption. Two codes of practice developed. ICMM monitoring initiative development

WEF AntiCorruption Initiative

World Economic Forum (WEF)

Corporate Initiatives Initiative Environmental, Safety and Corporate Social Responsibility Reporting Sponsor Corporate and site level sustainability reporting. Scope Companies issuing annual reports Status AngloGold Ashanti Ltd, Barrick Gold Corporation, Freeport McMoRan, Kinross, Newmont Mining Corporation, Placer Dome Inc, Rio Tinto, Goldfields

Jewelery Sector Initiatives Initiative Council for Sponsor Scope Status or Endorsements Fourteen founding

Jewelers Promotes responsible


Responsible Jewelery Practices (CRJP)

of America

ethical, social and environmental Practices throughout the diamond and gold jewellery supply chain from mine to retail.

members include bhpbilliton, Newmont, Rio Tinto, ABN-AMRO, Cartier, DTC, rosyblue, Signet, Tiffany and Zale