Fool Interview: Fronteer CEO Mark O'Deahttp://www.fool.com/investing/international/2008/09/26/fool-interview-fronteer-ceo-mark-odea.aspx Christopher Barker
September 26, 2008
Earlier this month, I had a chance to catch up with Fronteer Development Group (AMEX: FRG ) CEO Mark O'Dea. Given all that has changed on Wall Street in the intervening weeks, the following interview provides both a fascinating look back and an insightful glimpse forward. Let's see what O'Dea had to say about gold, commodities, and the mining industry at large.
Christopher Barker: Many investors sensed that a correction was inevitable after gold marched through the $1,000 mark, but the depth of this correction, and particularly its impact on the shares of miners, has taken everyone by surprise. Do you expect the precious-metals sector to mount a recovery soon, and what could provide a catalyst for that recovery?
Mark O'Dea: I don't think the majority of the resource sector expected the broader conditions to be what they are in the context of high gold prices, so I think it has caught a lot of people by surprise. I do think all the indications are pointing to us being at or near the bottom right here. I think we're seeing indications of acquisition cycles starting. We're seeing companies like Aurelian and Gold Eagle, and even some of these in the uranium sector starting to get acquired like Kintyre ... the asset in Western Australia. I think overall, that sector catalyst is going to be the acquisition cycle, and that's going to see some rebound in investment interest.
[Aurelian Resources has since been purchased by Kinross Gold (NYSE: KGC ) , Gold Eagle Mines will be acquired by Goldcorp (NYSE: GG ) , and the Kintyre uranium asset shifted from Rio Tinto (NYSE: RTP ) to a joint venture between Cameco (NYSE: CCJ ) and Mitsubishi.]
Barker: Do you expect that to coincide with more joint venture activity with the major miners as well?
O'Dea: I think so. I think majors are sitting on lots of cash; they're looking around at their pipeline of development projects -- not growing -- and looking out for quality assets in quality places and where they can acquire them.
Barker: While the operating cost of production is an important guiding metric, I have been very interested in tracking the all-in cost of production as a true gauge of the profitability of gold mining. Barrick Gold (NYSE: ABX ) CFO Jamie Sokalski has estimated the industry average all-in cost of production at between $700 and $800, while Gold Fields (NYSE: GFI