From explorer to producer

I wrote this piece in 1987, after Croesus’ first year as a publicly listed company.

The first year

In reviewing our first year as a listed company, we cover a year that has seen the first month completing the formalities of public listing, the next eight months as an aggressive explorer and the next three months as a medium-sized gold producer.

This twelve month period has seen us list with a capital raising of $2.5 million and ten months later outlay $20.3 million cash for an operating gold mine. This is complete with new milling and gold production facilities along with an exciting spread of advanced exploration prospects in the Kalgoorlie district.

These exploration prospects together with our earlier acquisitions have given us a sound foundation for expanding our current 25,000 oz per year production rate considerably over the coming years.

Our economic climate

As shareholders in a gold explorer and producer you are participating on one of Australia’s few success stories, speaking essentially from an industry standpoint.

Against a backdrop of economic pessimism, the gold industry is one of a very few industries which stands in stark contrast. The pessimistic backdrop is fuelled by Australia’s trade deficit figures which stands in the order of $16 million. This means that Australia is importing much more than it is exporting and therefore is liquidating its wealth at the rate of $16 million per year.

This ‘liquidation strategy’ for Australia equates to a rate of approximately $1,000 per man, woman and child per year. Wealth is reducing at this rate and so are future living standards, since wealth is equal to present value of consumption.

This trade deficit merely reflects our overall desire as a nation to consume our wealth.

Your company’s management and operating team are proud to be part of the ‘wealth creating’ sector of Australia (sometimes regarded as the ‘endangered species’). The continuity of the Federal Government’s current tax policies underwrite the continued expansion of the industry.

Already, figures compiled show how these prudent tax policies are contributing positively to government revenue, proving that the ‘total tax take’ for an expanding industry is greater than a ‘punitive primary tax’ on a shrinking industry.

Dark clouds

Dark clouds are looming on the horizon, however, as the full implications of Capital Gains Tax (CGT) and Fringe Benefit Tax (FBT) are becoming obvious.  So many other countries are offering attractive economic climates for much wanted exploration dollars, that it would not take much more economic nonsense like CGT and FBT to divert the flow of exploration dollars out of Australia.