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To: long-gone who wrote (23870)	12/6/1998 10:00:00 AM
From: goldsnow	Respond to of 116782

ANALYSIS-Placer deal a key test for S.African gold 06:10 a.m. Dec 06, 1998 Eastern By Darren Schuettler JOHANNESBURG, Dec 6 (Reuters) - A groundbreaking investment by Canada's Placer Dome in South Africa's once-mighty gold sector may spur other foreign heavyweights to give the country's cheap bullion assets a second look, analysts said. The $235 million infusion by Canada's second biggest gold producer has generated excitement in an industry that has struggled to lure offshore investors worried about ageing assets, political risk and economic turmoil. ''I don't think people realise how significant this is for our industry,'' BOE Securities gold analyst Gerhard Kemp told a recent mining conference in Johannesburg. ''One of the largest North American gold miners decided to invest not just in a company in South Africa, but in gold in the ground and the risk associated with that gold.'' Vancouver-based Placer Dome announced last week it would jointly develop the country's biggest gold deposit, South Deep, with Western Areas in what will be the largest investment in South Africa by a foreign mining company. The Canadian firm will hold a 50 percent stake in the Western Areas mine and the South Deep deposit, which have combined reserves of 59 million ounces. ''I think this is merely phase one of a lot more things to come in the South African mining industry,'' Kemp said, adding: ''Most South African gold assets are cheap.'' Kemp has revised his valuation for Western Areas' stock to 36 rand in the wake of the Placer deal. On Friday the share was unchanged at 24.70 rand on the Johannesburg bourse, well off its yea-rhigh of 32 rand reached in April. For Placer Dome, the venture will double its ore reserves to 60 million ounces and provide a strategic entry into the world's largest gold producing region. For its part Western Areas, based in Johannesburg, gains a foreign partner with expertise in mechanised mining and global ventures and with deep pockets to help develop the expensive South Deep site. Before the Placer deal, foreign investment in the gold sector was limited to junior companies with modest investments, said Magnus Ericsson, managing director of Swedish-based Raw Materials Group. ''We have seen little foreign investment, but hopefully Placer Dome and their entrance will change that,'' he said. Canada's other major gold producer, Barrick Gold Corp, has opted to join forces with South Africa's AngloGold to explore for gold in Mali, Senegal and the Democratic Republic of the Congo. Western Areas deputy chairman Brett Kebble said Placer had opened the door to South Africa, but the venture would be a significant test. ''They (Placer) have been in some difficult areas in the world and people will tend to use them as a bit of a litmus test as to whether the place is radioactive or not,'' Kebble told the mining conference. Placer chief executive John Willson last week attempted to play down the political and social risks associated with South Africa, which has suffered along with other emerging markets in the wake of Asia's downturn and which has struggled with high crime and chronic unemployment since the end of apartheid. ''We have developed a thorough understanding of the political and social dynamic of South Africa. Our conclusion (is that) the potential rewards of this investment far outweigh the associated risks,'' Willson told reporters. A key factor that could determine whether South Africa attracts more offshore companies is a new mining policy aimed at freeing up access to mineral rights. Foreign companies have complained that South Africa's minerals policy is antiquated and discourages investment because it allows parties to hold rights with no immediate intention of using them. But a new ''use-it-or-lose-it'' policy may not be passed by parliament until after next year's second all-race elections, analysts said. Copyright 1998 Reuters Limited