Gold Bullion Financing in a Post-Crash World: Trends, Results & Applications

INTRODUCTION Following the world stock market debacle in October 1987, it would have been foolhardy to expect that securing equity funding in 1988 would be easy. Indeed, major equity financing's for gold mining companies have until recently been few and far between in the weeks and months following Black Monday. As a result, gold bullion loans have taken on an increasingly important role among producing firms in the industry. During 1988, the role of bullion loans has become increasingly complex and controversial. Some observers herald the emergence of a new breed of bullion loans - such as the 1,000,000 ounce loan to Newmont Mining, and the 400,000+ ounce facilities drawn down by Bond International Gold and Placer Pacific - as both increasing the public's awareness of the technique, and representing the dawn of a new age of gold financing. But are these recent loan facilities significantly different than those issued worldwide during the early to mid 19801s? Similarly, observers have voiced concerns regarding the role that gold loans play in the world's bullion markets, specifically in relation to their impact on prices. Have the new generation of mega-loans depressed current and future prices? Has the current surge of bullion loans irrevocably changed the nature of the gold market? Is there an upper limit on the number and size of gold loans?