Although the Covid-19 outbreak disrupted gold mine production and mineral exchanges, the stock price of the leading gold producing companies globally significantly increased in 2020.
According to data presented by AksjeBloggen, the market capitalization of the world’s five largest gold producing companies hit $157.7bn in September, a 73% jump since the beginning of the year.
Newmont Corporation Market Cap Soared Almost 80% in 2020
The coronavirus crisis knocked down global physical gold demand to its lowest level since 2009, as the price of the precious metal hit new all-time highs. However, as the scale of the pandemic and its potential economic impact started to emerge, investors turned to the gold market, causing a surge in global demand for investment gold.
In December 2019, the market cap of Newmont Corporation, the largest of the top gold producing companies in the world, stood at $29.3bn, revealed the Yahoo Finance data. The corporation, which holds significant operations in North and South America, Asia, Australia, and Africa, produced 195.7 tonnes of gold last year, a 25% increase year-on-year.
By the middle of March, the combined value of the company’s stocks rose to $35.8bn, despite the stock market crash caused by the COVID-19 pandemic. The increasing trend continued in the following months, with the market cap jumping to $45bn in June. Statistics indicate the total value of stocks of the world’s largest gold producer hit $52.8bn in September, almost 80% increase since the beginning of the year.
Russia’s Largest Gold Producer Polyus Witnessed the Biggest Market Cap Increase
Barrick Gold ranked second on the list of the leading gold producers globally, with a production level of 170 tonnes in 2019, nearly 20% increase from the previous year. The company’s 10-year plan is based on production guidance of around 5 million ounces of gold per year.
Statistics show that the Toronto-based corporation’s market capitalization surged by 67% this year, rising from $30.9bn in December 2019 to $51.9bn in September.
The gold production level of AngloGold Ashanti, the third-largest company on this list, amounted to 102.1 tonnes in 2019, a slight decrease from the 106.1 tonnes it produced in 2018. In December, the market cap of the South African company with 17 gold operations in nine countries, stood at $9.46bn. During the last nine months, it rose to $11.66bn, a 23% jump since the beginning of the year.
Polyus produced 88.4 tonnes of gold last year, rising from seventh to fourth place on the list of the ten largest gold mining companies globally. However, this figure is expected to rise to approximately 2.8 million ounces or 87 tonnes of gold in 2020.
The Yahoo Finance data also revealed the leading gold producer in Russia witnessed the most significant increase in market capitalization among the top five gold-mining companies. In December, the combined value of the company’s stocks amounted to $15.26bn. In September, it hit $30.65bn, a 100% jump in nine months.
Statistics show the market cap of Kinross Gold, the fifth-largest gold producer globally, rose by more than 80% since the beginning of the year to $10.74bn in September.
The activities of the Djibouti Sovereign Fund (Fonds Souverain de Djibouti - FSD) were officially launched on Monday, September 14 at the presidential palace in the capital. Following the implementation decrees promulgated on June 24, 2020, a special inter-ministerial committee was held under the high authority of President Ismaël Omar Guelleh, in the presence of the Prime Minister, members of the government and the Fund's administrators.
The Sovereign Fund presents itself as an ambitious and innovative financial instrument aimed at turbocharging the country's development. It will strive to modernize the country's economy, to boost the growth of a competitive private sector and to enhance the development of the public productive sector, one of the essential instruments of this transformation.
Among the personalities present were the co-chairmen of SouthBridge, Mr. Donald Kaberuka (in videoconference) and Lionel Zinsou, as well as Mr. William Ediko, partner, who advised the Republic of Djibouti in setting up the Fund. Also present, Mr. Amir Jahanguiri, partner at law firm Willkie Farr & Gallagher, who advised the government for this project.
The holding of the inter-ministerial committee was also an opportunity to formalize the appointment of the Managing Director of the FSD, the Senegalese Mamadou Mbaye. A seasoned professional, Mr. Mbaye is a graduate of École Polytechnique and École nationale de la statistique et de l'administration économique (ENSAE) in France. He brings with him an outstanding experience in both the private and public sectors. He was previously Vice-President of the Sovereign Fund for Strategic Investments of Senegal (Fonsis).
The creation of the FSD is a flagship measure of the "Vision 2035", a long-term development strategy of the Republic of Djibouti which aims to position the country as a leading commercial, logistics, port and digital hub.
Established in the form of a private limited company whose sole shareholder is and will remain the State of Djibouti, the Fund aims to "collect" national wealth to leverage Djibouti's ability to invest quickly.
The advertising and media industry, like many, have taken a hit from the Covid-19 pandemic. But, unlike a host of others, it’s been fragile for a number of years. Global advertising spend is forecasted to fall by 9.1% by 2021.
Advertising agencies are faced with shorter consumer attention spans, plummeting budgets, an ever-evolving media channel dynamic and the pressure to deliver faster than ever before. This, coupled with clients’ growing concern over their return-on-investment, has resulted in issues in the relationships advertising agencies have with their clients.
An unspoken issue in this relationship is the opportunistic behaviour by both parties, to the deliberate detriment of each other. Beneath the glamorous award ceremonies, witty campaigns by our favourite fast food joints and jumping on the latest Instagram challenge bandwagon are deceptive behaviours. A case in point is the Wimpy-McDonald’s scandal. After pitching an idea to McDonald’s, employees of advertising agency OwenKessel Leo Burnett began working at a new advertising agency, ‘The Odd Number’. There, they pitched the same idea that they had pitched to McDonald’s. In the end, the competing fast-food chains released the same advert.
A recent study exposes how clients (i.e., marketing managers at firms) and advertising agencies in South Africa act this way. This is confessed by advertising agencies and clients themselves. Both parties acknowledge that opportunism happens, blame the other, yet recognise the existence of opportunism on their part as well.
The study directs attention to client–agency opportunism by describing how it happens. It concludes with a discussion on how today’s client–agency dynamics can be improved. One suggestion, for example, is a simple two-way communication. Both advertising agencies and clients should clearly state what their objectives and available resources are. This will set the expectations of the relationship, to avoid misunderstandings, assumptions or tit-for-tat behaviour.
We interviewed account managers at leading advertising agencies, representing the advertising agency, and marketing managers at established firms, representing the client.
The research shows that advertising agencies and clients act opportunistically both before and after the signing of a contract. Based on verbatims from the key account managers and marketing managers, the following findings were obtained.
Pre-contract, advertising agencies over-promise and withhold information. Often, the senior executives who pitch to the client are promised to work on the actual campaign, yet junior employees end up working on it post-contract. Other advertising agencies list clients on their website who they have done menial, or no, work for, giving a misleading impression of their credibility.
A particularly unique trait of advertising agencies is their prioritisation of winning awards, rather than doing what is best for the client’s return-on-investment. They might suggest, for example, the client pays R150 000 (about US$8990) for a television commercial, with the intention of using the campaign to win an advertising award. The client in this case would have benefited more from spending the money elsewhere.
Clients act opportunistically pre-contract by exploiting advertising agencies and withholding information. They might promise to pay the advertising agency for 80 hours of work, yet intend to subtly ask the advertising agencies for 10 more hours of work during the process without extra pay. Some clients steal the creative ideas that advertising agencies have pitched to them.
Once the honeymoon phase is over, the opportunism grows. Both parties continue to withhold information to maintain an advantage over the other. Advertising agencies overcharge by misrepresenting their actual hours working on the campaign. They also mislead their client to believe that the work undertaken is strenuous. This type of behaviour was prevalent with the advent of digital marketing. Clients overpaid for setting up websites or Facebook campaigns because it was unfamiliar territory to them. They did not know how few hours it actually took to create a Facebook advert.
Some agencies neglect, or stall, smaller client work to meet the demands of larger clients. Other agencies create separate entities, to work with competing brands from the same industry. For example, Entity A works with ‘Betty’s Burgers’ and Entity B works with ‘Bob’s Burgers’. In the case where allocated human and financial resources are agreed in advance, some agencies fail to disclose to the client when an employee has left their agency. This leaves the advertising agency with more money to distribute among their staff.
Post-contract, clients primarily use their power advantage to illtreat advertising agencies. This includes calling the advertising agency’s key account manager on a Sunday morning to demand work for 8am the next day. Some clients also send vague WhatsApp messages as briefs and expect the agency to deliver an outstanding campaign off that. In some cases, marketing managers may blame advertising agencies for ‘poor work’. This is done to encourage their board to hire an alternative advertising agency with whom the marketing manager has a personal relationship with.
Be that as it may, opportunistic behaviour in these relationships will continue to prevail. While there are sincerely altruistic people out there, opportunism is inherent in human behaviour. This is evident by the cases, such as Facebook and Cambridge Analytica; Volkswagen’s Dieselgate; and the North Face-Wikipedia scandals.
That said, favourable working relationships can be fostered by two-way communication, accountability from both parties, seeking an appropriate culture-fit early on, being fair and realistic when charging and paying, embodying reliability and adapting to changes in the environment as partners.
This article is based on the study, Perspectives: client–agency opportunism: how does it happen and what can we do about it?, that Raeesah Chohan co-authored with Richard Watson and Leyland Pitt, which was published in the International Journal of Advertising.