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GOLD MINERS ROUNDUP 36 E&MJ; • MAY 2018 www.e-mj.com operation to DRDGOLD in exchange "for a 38% stake in that company with an option to acquire a majority stake," Sibanye-Stillwater reported. That will "enable us to realize immediate value from the West Rand tailings retreatment project while providing future optionality without the need to incur significant cap- ital investment." 2018 Guidance According to the miners, there are two angles to the backstory on declining pro- duction in the midst of rising prices and relatively low costs, and both could show up again in the annual reports for 2018. The first is peak gold. Grades and reserves at many of the world's biggest mines are, generally speaking, in decline and the life-extension projects and new mines that might replace the resulting lost production is either nonexistent, uneconomical at the highest prices in four years, or cannot be ramped up quickly. Gold Fields listed other factors indicative of peak gold in the future markets analy- sis section of its year-end report, stating, "Many gold market analysts are of the view that the industry has reached peak production levels given the limited num- ber of new gold discoveries since the mid- 1990s together with the decreased levels of exploration spending in recent years." The second is central bank activity and the expectation of it. So much so is this a commonly understood reality in the sector that when, in its annual report, Newmont lists the 13 factors that it has identified as influencing price, five of them pertain to central bank activities: gold purchas- es or leases by central banks, the rela- tive strength of the dollar, expectations of inflation, interest rates, and central bank fiscal policies. The value of the dollar on the market, which is decided in part by the Federal Reserve's key rates, impacted gold prices throughout 2017, Barrick reported. "Over the year, the gold price was positively influenced by a weakening of the trade- weighted dollar to lows not seen since early 2015," it reported. Throughout the year, the key rates at the Fed, the Bank of England, the Bank of Japan and the Euro- pean Central Bank, in real terms, were all negative, meaning the interest rate was lower than the inflation rate. This lifted gold prices somewhat in 2017, and the anticipation of higher interest rates has since then had the opposite effect. Going forward, however, central bank key rate hikes could either suppress gold prices or introduce price volatility, Gold- corp reported. "2018 marks a change in leadership at the Federal Reserve Bank, with market expectations for a continua- tion of their recent balance sheet normal - ization process and an additional three or four rate hikes in 2018," the compa- ny reported. "In addition to any impact from interest rate policy, the dollar index is trading close to three-year lows, and uncertainty surrounding the US dollar's direction during 2018 is likely to be re- flected in future gold price volatility." In- deed, the likelihood of Fed action quash- ing the gold price rally to backstop the dollar is high enough to bear mentioning in Barrick's annual report. "The outlook for gold remains relatively muted, with expectations of the U.S. Federal Reserve raising rates in the U.S., capping upside in 2018," the world's foremost gold pro- ducer reported. "Gold demand remains relatively firm, however, and the specter of rising global inflation is likely to pro- vide ongoing support below $1,300/oz in our view." Beyond setting interest rates, the cen- tral banks of the world have been among the world's foremost gold purchasers, and those purchases have been declining recently, Gold Fields reported. "Net pur- chases by central banks and other official institutions continued to slow in 2017, decreasing to 371 mt from 390 mt in 2016, and 577 mt in 2015," it reported. "However, buying by the Russian and Chi- nese central banks, while having slowed down, is expected to continue in 2018." Thus, according to the miners, it is likely central bank activity — whether it is the key rate hikes planned by the Fed- eral Reserve or gold purchasing by the Chinese central bank to bolster the fledg- ling so-called petro-yuan 3 — will be the foremost factor affecting gold prices and, in turn, production in 2018. Miners move ore from multiple benches at the Canadian Malartic mine, Canada's largest gold mine, located in Quebec. (Photo: Agnico Eagle) 3 For example, see Kemp, J. (April 3, 2018), China's Crude Oil Futures Contract Should Confound the Skeptics. Retrieved from www.reuters.com/article/us-oil-prices-kemp/ chinas-crude-oil-futures-contract-should-confound-the-skeptics-idUSKCN1HA040.