Lifestyle or Returns: a Gold Industry Choice

Gold companies desperately need a new business model to rehabilitate themselves in the eyes of investors. No matter what the condition of the gold market itself, investors rarely get the benefit of a successful project development. Positive cash flows are almost always ploughed into high risk exploration to avert an output decline or attempts to stall the inevitable rise in costs as a mine heads toward the end of its life. A US company – Ascenergy – could be a model for a solution. Ascenergy, an early stage oilfield developer, has recognised that “company founders and executives typically get paid very well, but the investors holding a working interest are left with a fraction of what they expected”, just as in the gold industry. Ascenergy offers investors a share of revenue. It actually goes one step further by guaranteeing investors a minimum monthly income through a direct participation in future well developments. Other than its threat to executive lifestyle, there is no reason a similar model could not be adapted for the gold mining industry.