CEF Holdings Ltd., a venture between Li Ka-shing’s flagship company and Canadian Imperial Bank of Commerce, is looking to invest in gold mining companies after a slump in prices creates buying opportunities.
“Long term, gold is a good place to be,” CEF Chief Executive Officer Warren Gilman, 53, said in an interview in Hong Kong. Cheung Kong Holdings Ltd. (1), controlled by Li, Asia’s richest man, and CIBC each own 50 percent of CEF. The venture focuses on investing in resources companies globally.
Bullion is heading for its first annual decline since 2000 and has slumped 27 percent from a record $1,921.15 an ounce in September 2011. The plunge prompted investors John Paulson and George Soros to sell gold as mining companies cut jobs and the valuation of their mines.
“I was a little uncomfortable making investment in gold at $1,700 and $1,800 an ounce,” Gilman said yesterday. “The correction we’ve had this year from my perspective is great because we can hopefully fulfill that objective of making some gold investments.”
CEF recently made debt investments in Uranium Energy Corp. and Avanti Mining Inc., which is developing a molybdenum mine in Canada. Gilman declined to comment about CEF’s size or cash available for investments.
Li, 85, has an estimated net worth of $27 billion, according to the Bloomberg Billionaires Index. CEF Holdings was established in 1974 by Cheung Kong and CIBC, Gilman said.
Gold for immediate delivery fell 0.4 percent to $1,399.33 an ounce as at 12:46 p.m. Singapore time. The metal is down 16 percent this year as the dollar strengthened and amid concern that the Federal Reserve will begin cutting back its stimulus measures.
Prices may stay between $1,000 an ounce and $1,400 an ounce for “a couple of years and that’s predominantly because gold has to get used to, and it still seems to be adjusting, to the taper and rising real interest rates globally,” Gilman said. He previously co-founded CIBC’s global mining group and was later vice chairman of the bank’s CIBC World Markets.
Prices will average $1,300 an ounce in the fourth quarter, the median of 17 analyst estimates compiled by Bloomberg shows. Bank of America Corp. is the most bullish, predicting a fourth-quarter average of $1,495 an ounce, and JPMorgan Chase & Co. anticipates rising averages in every quarter through the end of next year.
Gold has rallied 13 percent since the end of June as lower prices boosted demand, particularly in Asia, with prices averaging $1,313.58 an ounce. Bullion will rebound as spending cuts by producers and the closure of costly operations brings better balance to supply and demand, the producer-funded World Gold Council said this month.
“It’s tougher and tougher to find economic gold deposits in safe jurisdictions,” Gilman said. “You see mine supply struggling to keep up with demand long term. That’s a great recipe for higher prices in the longer term.”
Gold mining companies have announced at least $26 billion of writedowns in recent months and are seeking to sell assets after prices declined.
Gold Fields Ltd. last week agreed to pay $300 million for three Barrick Gold Corp. mines in Australia. Norton Gold Fields Ltd., the Australian producer controlled by China’s Zijin Mining Group Co., said this month it’s seeking further acquisition targets as falling prices cut the value of mines.
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