Chairman's Address
Shareholders and friends of Range,
Today I would like to talk briefly about gold and how the global supply of and demand for gold presents Range with an exciting, almost once in a lifetime opportunity, given the quality of its gold assets.
Our Managing Director, Rick Watsford will tell you more about our mining and exploration activities in the particularly exciting Mt Morgans gold camp in Australia's premier gold province.
First let me thank all our shareholders for their continuing interest in, and support for the company. The global financial crisis bit deep into the economies of the world in 2008 and continued to feed on them throughout much of 2009. In late 2008 as the magnitude and reach of the GFC became clear, gold was just over US$720 per ounce. As the US$ devalued, the price of gold has risen almost consistently to today's US$1300 per ounce levels.
Over May-August this year, the gold price decoupled from the devaluing US$, and the historically strong correlation between the AU$/US$ exchange rate and gold price, changed fundamentally. Demand for investment gold suddenly grew and is exceeding supply. The World Gold Council, in its Gold Demand Trends report for the second quarter of this year has said that, and I quote. "...demand for gold for the rest of 2010 will be underpinned by the following market forces:
India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewellery, for the remainder of 2010.
Retail investment will continue to be a substantial source of gold demand in Europe.
Over the longer-term, demand for gold in China is expected to grow considerably.
Electronics demand is likely to return to higher historic levels after the sector exhibited
further signs of recovery, especially in the US and Japan."
In Q2 2010, total gold demand rose by 36% to 1,050 tonnes. Demand is anticipated to further increase over Q3 and Q4 as these are traditionally the strongest for gold, driven by the wedding season and Diwali festival in India and by Asian buying in preparation for the Chinese New Year.
However, investment demand was the strongest performing segment during the second quarter, rising 118% compared with Q2 2009. Of this, the largest contribution came from the Exchange Traded Funds segment, which grew by 414%. And for the first time in over 20 years, the central banks turned into net buyers of gold signalling a fundamental shift in their investment strategies.
In the longer term global gold production is expected to be stagnant for the next five years or more increasing the supply demand gap and most likely gold price. The general view among those in the industry, who understand gold price dynamics, is that gold should reach US$1,500 per ounce by end Q4 this year.
What does this mean for Range River and what does it mean for you, our shareholders? Range has significant exposure to gold price at Mt Morgans and this creates many opportunities to grow. Range is an established producer with an underlying plan to mine 40,000 to 50,000 ounces of gold per annum at a life of mine average cash cost of AU$750-800 per ounce. The profitability of this production rises significantly with forecast increases in gold price.
Range has many near-mine targets that should add to this production plan. Our recent success in adding nearly 50,000 oz of mineable inventory is a clear example of this opportunity.
In a scenario of rising gold price these extra ounces also add significantly to Range's exposure to the gold price.
Your Company has developed a plan to grow our production to 100,000 ounces per annum within five years through incremental and `brown fields' exploration. This further enhances Range's
exposure to the gold price.
Finally, Mt Morgans is located in a region of mega gold deposits with a total endowment in excess of 30 million ounces. Favourable geology and Range's excellent land position in this region offer further opportunities for a major discovery and add further option value to Range through exposure to the gold price.
What it means is "Turning good prospects into gold."
With a more or less stable AU$ gold price since August of about AU$1300 an ounce we have had some price stability for our operations. The medium term outlook for the global supply of gold and prices is very favourable and the Board believes the Company must accelerate its mining and exploration activities to capitalise on this opportunity. Range is well placed to realise on what we see as a five-year window of anticipated growing gold prices. With your continued support, we can build the Company to the status of a medium producer.
Kevin Tuckwell
Chairman
