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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (13638)	6/22/1998 8:58:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116871

Gold miners say big is beautiful 12:54 p.m. Jun 22, 1998 Eastern By Patrick Chalmers BARCELONA, Spain, June 22 (Reuters) - Gold miners from the world's major producing regions sang from the same songsheet on Monday, chorusing that size was what mattered in the current period of rock-bottom gold prices. While miners from South Africa, North America and Australia differed in what they thought had caused their precious metal's value to slump, they all told gold conference delegates that smaller companies faced the greatest pressures. Peter Lalor, executive chairman and management director of Australia's Sons of Gwalia, said mines in his country had managed to cut cash costs to survive U.S. dollar price falls. ''Over the last 12 months, the Australian gold mining industry's cash costs have fallen from A$360 to A$320, a reduction of approximately 11 percent over this period. ''This is a substantial achievement but the obvious questions are: can there be further reductions and can they be maintained? My own view is that further reductions will be marginal but that they can be maintained at least over the next few years,'' he added. Lalor said that while the larger Australian mines were protected by substantial hedge books and exploration activities, the smaller ones faced greater pressures, even with the cushion of a weak Australian dollar. ''Small gold mining and exploration companies traditionally raise funds in buoyant conditions for gold and when market sentiment is positive,'' Lalor said. ''The availability of either debt or equity for smaller gold mining or exploration companies in the sector is now highly questionable and the future of these companies must be regarded as poor,'' he added. ''Fewer and larger companies will dominate the industry over the next few years,'' he said. John Willson, president and chief executive officer of Placer Dome, saw a similar picture. ''Our tendency in North America at the minute is to raise the quality of our assets (by) disposing of our lesser assets to the lesser companies,'' he said in response to questions after his speech. Willson said the potential for mergers and acquisitions among North American miners was limited. ''It's really difficult to see value in merging with another North American company of high value. I think what we are going to see is some of the smaller companies failing and the larger ones remaining as they are,'' he added. Bobby Godsell, chief executive officer at South African mining giant Anglogold predicted cross-border alliances between firms seeking to extend their mining expertise. ''What I see is a pattern of alliance and partnerships. We as a company have virtually no experience in open cut mining. I would see partnerships in mining competence,'' he said, adding that mega-mergers were probably not the answer. 'The capacity for ego gratification without creating value is going to decrease,' he added. Mark Fellows, gold mine analyst with UK-based consultants Brook Hunt, told Reuters ahead of the conference that miners had yet to grasp the reality of low prices and repeated predictions made in March that production cutbacks were essential to check gold's fall. ''There's basically still denial. When are we going to start seeing some cutbacks?,'' he asked. ''I think one thing for sure is that central banks are going to keep supplying gold to the market which means we have too much gold,'' he added. Fellows said the gold price had tracked lower with falls in miners' production costs, a trend which, if maintained, pointed to lower prices for some time yet. ''If (the gold price) continues in this relationship to production costs, we are looking at a price in the very low $300s for the forseeable future until there are significant production cuts,'' he said. Gold hit 18-year lows under $280 an ounce last January and despite one or two rallies above $300 since, has failed to make a sustained recovery. Copyright 1998 Reuters Limited