Business and Development

What Will Happen If

Gold Prices Rise?

By a staff writer

How would New Guinea Goldfields and Fiji’s Emperor Mines are if the 35-year-old world price of gold at SUS3S an ounce yent up?

There have been innumerable false larms in recent years that the price >f gold would double —at least. If his happened, the US, a big seller •f gold, would be weakened, and Tance, a big buyer of gold, and outh Africa, a major world pro ucer, would be strengthened.

In May prices for “free” gold early topped SUS 44 an ounce in the ich London and Hong Kong markets ollowing the resignation of President e Gaulle, and once again moneymen hroughout the world tipped that fficial gold prices would soon rise.

With the economic future of Tance, West Germany and Britain ncertain, there remains a possibility lat the price of gold will rise. A ydney stockbroker, Patrick and Company, has projected profits of old producers, should the prices go P-

Big profits possible

Patrick said if the gold price rose > SUS4O an ounce, NG Goldfields’ 967-68 profit of $A302,000 would ise to $A369,000, and if it doubled 3 SUS7O an ounce, profits would rise 3 $A767,000.

This projection discounted the com any’s timber operations, which re ently suffered setbacks, and its trad ig and shipping business.

Patrick pointed out that the com any had 4,472,332 35-cent shares on sue and it received no government Libsidy. Calculated future profits, aid Patrick, were based at the Lirrent rate of production at 14,882 unces a year.

Last year NG Goldfields paid a 3.5 er cent, dividend. Prices for its lares in late May were about 70 2nts.

Emperor Mines, with a 1967-68 rofit of $A 137,000, would see this rofit rise to $A258,000 should the rice of gold rise to SUS4O, and

$A3,356,000 should gold increase to SUS7O an ounce.

Patrick said the Fijian Government had granted Emperor a subsidy of up to $A688,000 a year until April, 1970, to assist its exploration pro gramme to lift established reserves.

Current stated reserves were 955,000 tons at 8.8 dwts and a further indicated 800,000 tons con taining 7.8 dwts of gold. On the basis of current extraction of about 320,000 tons a year, this limited mine life to about 1973. However, PI M’s finance writer understands it is procedure for mining companies to release con servative figures for reserves. For example, it’s not unusual when Seated reserves are running out to announce that there are so many extra tonnages.

Emperor has 2,227,000 10 cent shares and it paid a dividend of 2.5 per cent, in 1968. Gold production is nearly eight times greater than that of NG Goldfields—in 1967-68 it was 108,173 ounces and some of this was sold at “free prices” of about SUS4O an ounce through Hong Kong buyers.

The company’s future profits should official gold prices go up has largely been discounted by buyers on Aus tralian Stock Exchanges—prices in May for Emperor shares were about $3 although they had reached $4.20 earlier this year.

Southland: huge jump

in shares predicted

An Australian investment adviser predicted that the 25 cent shares of Southland Mining Ltd., Fiji manga nese exporter and gold explorer and New Caledonian nickel “hopeful”, will command a price of SA22 in 1972.

Southland joined the Australian Stock Exchange early this year and in late May the shares were selling for $3.55, after varying so far from $1.82 to $4.

Slight fall in NG

Gold output

Gold, silver and timber pro duction figures for New Guinea Goldfields fell slightly in April, compared with March outputs.

Gold fell from 1,228 ounces to 1,203 ounces, silver from 1,016 ounces to 967 ounces and timber from 190,876 super feel to 185,362 super feet. Gold came from the Golden Ridge mill.

Cowan Investment Survey Pty.

Limited, in a glowing review of Southland’s future prospects with Fiji manganese exports and interests in a West African iron ore venture, said the company had “all the hall marks of greatness” and was “already showing signs of a giant complex in the making”.

Dealing with Fiji, Cowan said Southland had begun viable manga nese mining operations. It was on the way to earning a pre-tax profit of $A400,000 in the 12 months to the end of April, 1970.

This profit would be based on full scale mining operations (started in April this year) at an annual rate of 10,000 tons of high-grade dioxide ere and 40,000 tons of good-grade siliceous ore from its manganese de posits outside Lautoka.

Cowan said that on the basis of Southland’s forecasts, costs (mining, royalties, depreciation, etc.) could be an average of $6.50 per ton. On the basis of $46 per ton (f.0.b.) for dioxide ore and sl3 for siliceous ore. revenue for the 12 month’s operations would total $980,000, with costs $325,000.

This would leave a pre-tax profit of $665,000.

Southland’s projected extensions forecast siliceous ore rising to 65,000 tons in 1970-71 and 90,000 tons in 1971-72, and pre-tax profits on this basis would be $817,500 in 1970-71 and $980,000 in 1971-72, Cowan said.

These figures may be better be cause manganese prices could move upward in this period and production costs on a bigger production volume should move downwards.

Cowan estimated that Southland's share of a West African iron ore deal

could realise $5.4 million profits by 1971-72.

Taking into account ventures (without considering any results from nickel leases Southland is pursuing in New Caledonia, or its search for gold in Fiji), Cowan said that by applying a factor of a conservative 18 times earnings in 1972, South land’s shares would be worth sl6.

On a factor of 25 times earnings, the shares would fetch $22.

Needless to say, Cowan recom mended Southland as a “bu>” to its clients in an issue of its Weekly Market Digest.

Indonesia to make

a copra comeback?

Copra producers, particularly the bigger New Guinea and Fiji growers, will be interested in the recent news that the Indonesian Government will set up a Copra Management Board.

It’s a move to regain Indonesia’s former position as the world’s top copra producer. Before 1939, Indo nesia exported an average of 500,000 tons a year.

Mismanagement and neglect, par ticularly of its biggest producing

regions in the eastern islands, resulted in Indonesia losing trade to the Philippines, which today controls 54 per cent, of the world’s market. Indo nesia has 27 per cent. New Guinea has less than 10 per cent.

Indonesia’s Trade Minister, Pro fessor Sumitro, accompanied by ex-1 perts from the World Bank and the International Monetary Fund, re cently toured the country’s copra producing regions. The Hong Kong based journal, Far Eastern Economic ] Review, reported that Professor!

Sumitro said one problem was safe guarding stability of income for Indo nesian producers against overseas price fluctuations. He is currently working out a policy to overcome this.

Indonesia’s two potential big buyers] of copra are Britain’s Unilever and the US National Institute of Oil Crushers.

Though it could be a few years yet before there is any dramatic increase in Indonesian copra production, tougher competition between the world’s “big two” copra exporters could lower the price for Islands copra.

Receivals of copra in P-NG for 1968-69 are running ahead of the previous year and production is now expected to be 135,000 tons—l7,ooo tons ahead of 1967-68. This would] beat NG’s record of 127,000 tons in 1965-66.

Solomons' timber

exports increase

The export of logs from the British Solomon Islands Protectorate in creased during 1968, according to a report just published by the Pro tectorate’s Forestry Department.

The total volume for the year was more than 4.4 million cubic ft, com pared with 2.8 million in 1967. The 1968 figure represents almost a four-1 fold increase over exports for 1966.

But in spite of the encouraging export figures, the report said that 1968 was not an easy year for the industry. There were serious market ing difficulties with the BSIP’s best timber customer, Japan, and the prices offered for one of the major timber species were too low to make its ex traction economic.

During the year no developments had been made towards large-scale sawn timber for export, as had been hoped. This, however, was an in creasingly likely line of development which should counter marketing dif ficulties, the report said.

Three fatal accidents in the timber industry recently have sparked off

at the Commissioner of Labour Is “growing concern”. He said it measures were being taken to ng to the notice of employers the id for better safety training.

The three accidents —at three dif ent sites —involved falling trees.

urtle farming

>r Islands?

Marine biologists are paying in :asing attention to that benign old dlback of the sea, the turtle.

With the growing need to find new irces of food for the world’s pulation, turtle “farming” could :ome an important industry in ;ure—particularly in the South cific.

The first step of a large-scale sur y of turtle and crayfish resources the area has been undertaken by 5 South Pacific Islands Fisheries :velopment Agency. Questionnaires ve been sent to fisheries depart :nts in all member countries, seek ; data on turtle and crayfish popu ions and habitats.

In Fiji alone, more than 70 Peace »rps volunteers will assist the local heries division to complete the estionnaires.

The turtle survey is of special in est because turtles live directly plant life, thus creating a source red-meat protein from carbo drates in the sea.

If turtle “farming” became a dity, it would do much to increase ; world’s source of protein.

Turtles were also in the news in ji recently when a Nadi cruise erator, Mr. Brian Dean, captured newly-hatched ones on Vunivadra and.

While rearing them until they’re I enough to ensure survival, he in ids to sound a gong at a set time ch day while feeding them. After ey have been freed into the sea, hopes they will return to the and at the sound of the gong.

“It’s just an experiment. But if works it could be as unique an traction as the turtle-calling carried it by Fijians at Koro,” he said.

►ffer for

angora shares

Pacific Acceptance Corporation y. Ltd., a New Guinea-registered •mpany, has made an offer of 32 nts for 50 cent shares in Sangara foldings) Ltd., nominal owner of ur NG hotels and two rubber-cocoa antations in Papua. Directors of

Sangara in May recommended ac ceptance of the offer.

Sangara is the registered owner of Rabaul’s Cosmopolitan Hotel, the Goroka and Wau Hotels and the Hotel Cecil, Lae. It owns Sangara and Wijo Plantations, in Papua’s Northern District.

The last time the company’s shares changed hands was in 1964—when they did so for about 12 cents. Since then the company’s shares have not been listed.

The delisting followed complex disputes reported in PIM (Feb., 1965, p. 125) over ownership and profit ability of the company’s hotels. From 1965 new management of the com pany was introduced.

Pacific Acceptance is in no way related to Pacific Acceptance Cor poration Ltd., at present under official management.

Taxes up in the

Cook Islands

In an effort to raise Cook Islands’ revenue by SNZIOO,OOO, Mr. Albert Henry, Premier of the Cook Islands, has introduced new taxes and in creased others—though he has not increased income tax.

Mr. Henry announced 11 new pro visions to the Cooks income tax bill.

The provisions include one un precedented tax to discourage over seas exporters (NZ dominates this trade) to the Cooks.

“Overseas suppliers of goods to the Cook Islands are subject to tax on income derived from the sale of such goods to the Cook Islands,” the pro vision states.

“In the first instance the assess ment will be issued to the person importing the goods who is now deemed to be Cook Island agent of the overseas supplier. The agent then recovers from the overseas sup plier the tax paid.”

The NZ Trade Commission Sydney office told PIM that this tax was “most unusual”. Because two tax payments had to be made, it was probably designed to put off people exporting to the Cooks, so the goods involved could either be produced locally or not bought at all.

A lower import bill for the Cooks would save valuable exchange sent to Britain, the US, Australia and Japan, the territory’s major suppliers after NZ (the Cooks are in the NZ currency zone and use NZ money).

NZ customs duties have operated generally in the Cooks but with amendments to suit local conditions.

Where goods have not been subject to duty, sales taxes have previously been imposed (goods in this category

include such items as cigarettes, spirits and beer).

Mr. Henry’s other provisions in clude: • Company taxes, up from a minimum rate of six cents for every dollar to 20 cents for income under $5,000, from 30 cents to 37i cents for every dollar for income over SIO,OOO. • A “working tax” or tax on in come earned by visitors staying over 30 days, with tax rates doubled if “visitors” stayed over 15 months. • Al 5 per cent, tax on company dividends paid after April 1 to be paid by the companies before divi dends are distributed to shareholders. • A tax on bonus issues of com pany shares. • A 2.5 cents in the dollar tax on exports of all produce except copra and pearl shell which are already subject to a 5 per cent, export duty. • Anew rate of 37.5 cents in the dollar on all income derived by com panies not resident but operating in the Cooks. • Tax exemption for dependent children to be reduced from 18 to 16 years and for payments for life and accident insurance premiums to be raised from S4OO to S6OO. • Late payment penalties of taxes to go up from 5 per cent, to 10 per cent, and the maximum penal tax to be three times the amount of the deficient tax.

Late bid for

Tongan oil rights

It’s a small world, thought many Tongans in May when geologist John Grover became the fourth bidder for permits to search for oil in the king dom. He made it on behalf of others.

Last November, Mr. Grover said: “Nukualofa is sitting on top of oil bearing rock for miles. This is the real McCoy. It’s ‘live oil’—exactly the same oil that is mined in Texas.” (PIM, Dec., 1968, p. 36.) Earlier, in his capacity as Fiji’s Director of Geological Surveys, Mr.

Grover had travelled to Tonga and confirmed the kingdom’s oil seepages on the island of Eua {PIM, Oct., 1968, p. 27).

Mr. Grover left Fiji early this year and became general manager of Kathleen Investments (Australia) Ltd., a profitable Australian miner and investor with only indirect in terests in oil.

In his new capacity, Mr. Grover has applied for prospecting rights with an unofficial proposition for

Tongan Government participation.

Mr. Grover applied on behalf of Longreach Oil and Abrolhos, as well as Kathleen.

If Mr. Grover gets the prospecting rights, it is likely that Kathleen will supply the finance and Longreach and Abrolhos will be the operator.

As reported. Shell, British Petroleum and the French firm Aquitane have already applied for almost identical rights (PIM, Mar. p. 120).

The ball—more than ever—is in the Tongans’ court, particularly with the recent visit from London of Mr.

J. Hartshorn, a previous adviser to Tonga on matters concerning oil.

Fiji copra increase

• Copra production in Fiji in the first four months of this year was 25 per cent, up on the first four months of last year, and indications are that the estimated 30,000 tons for this year can be exceeded. Fiji’s Coconut Advisory Council has stated that 89 per cent, of the copra produced during this period was Grade 1 as compared with 78 per cent, for the same period last year.