Big ones in the hunt?
Flashback:
Wednesday, November 29, 2006
BHP Billiton eyes expansion in gold, may buy mine
BHP Billiton, the world's biggest miner of industrial minerals, said on Wednesday it may boost its exposure to the red- hot gold sector. Gold prices have rocketed this year to their highest in 26 years as a new wave of speculative investors put fresh polish on one of the world's oldest commodities. BHP Billiton Chief Executive Chip Goodyear said the company was underexposed to bullion, and would look at buying a gold mine if the right one came along. Only a fraction of BHP Billiton's $10.45 billion in profit last year came from gold, which it extracts from ore much richer in copper, zinc, lead and other industrial staples. "Relative to our size, we are not a significant producer. Our view would be that if we found a gold opportunity, could we develop it? I think the answer to that is yes," said Goodyear. In Australia, the world's third-largest producer of gold and where BHP is headquartered, shares in top gold miner Newcrest, have increased 5.5 percent this week, with close rival Lihir Gold up almost 6 percent. Both companies have long been tipped by analysts as takeover targets. Speculation has emerged in recent weeks that BHP Billiton may be setting its sights on U.S. miner Freeport-McMoRan Copper and Gold Inc, where Goodyear once served as chief financial officer. "There is consolidation going on in the industry and we keep an eye on everything that's moving," Goodyear said. He later told reporters that the era of the single commodity mining house was under threat as big firms seek to protect against downturns in any one particular sector. In the most recent example, Brazilian iron ore miner CVRD agreed to pay over $17 billion for Canadian nickel and copper giant Inco Ltd (Reuters).
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The more players and the deeper the pockets, the higher this Rocket's rocket flies.
With 10 million ounces easily in the relatively high grade core of FDN this one, I speculate, falls in the sites of the big integrated resources producers (i.e. Rio Tinto, BHP). I think of a minimum of about US$3b gross insitu commodity value as a very general rule of thumb before the giants are interested. (any others view on this would be greatly appreciated).
More ramblings on this and another's viewpoint in response:
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