Gold production dominance is moving away from the world’s top gold mining areas to new ones opening the way for acquisition targets in traditional gold mining countries by the global players.
Author: Ross Louthean
Posted: Monday , 21 May 2007
PERTH - London-based gold industry publisher and commentator Paul Burton told an industry conference in Perth today that the pattern of global production had shifted away from the perceived big four producers - South Africa, the United States, Australia and Canada.
As a result, companies with good Australian projects may find themselves targeted for acquisition by global players. A factor behind this are cost and exploration pressures, and Australia is one of the countries really feeling those impacts. The gold price climbed 24% in 2006 but cash costs by comparison have risen 19% over the same period - a point of which many local delegates at Paydirt's Gold Conference are aware.
Burton, publisher of World Gold Analyst said that in the past decade there had been a marked downturn in production by the big four, with South Africa plummeting 46% over that period and Australia 16%.
"South Africa used to command 21% of global gold output but is now down to 12%. They are losing share to the ‘new' gold producer countries such as China, Russia and Peru," he said.
He claimed China was now the third largest producer in the world and will increase that further as the thousands of small domestic gold mines which have been unconsolidated, undercapitalised and inefficient, give way to foreign ownership and modern exploration, mining and processing. (Some analytical groups have not, as yet, placed China that high, but they will certainly take heed of Burton's views, given that he is undoubtedly the most travelled gold journalist in the world. He has just produced a new study on the China gold scene).
Burton said the change trend was occurring at a time gold production had peaked - impacted by the five year low gold price up until 2001, the Bre-X scandal, exploration cutbacks, few discoveries and little or no new production coming on.
"The majors are struggling to replace resources and will continue to lose ground to ‘new' regions unless they cut costs to maintain a premium for their higher grade gold reserves," Burton said.
"They should also consider focusing on multi-metal opportunities rather than singular gold assets as those with good gold projects will be targeted for acquisition and the merger and acquisition market is already placing a value on these ounces.
"This can be as much as $US150/ounce in South America ranging down to ‘new' regions such as Asia where in-ground ounces can attract less than $US25/oz - and therefore offer substantial upside potential."