To:mikesloan who wrote (276)
From: mikesloan Monday, Jul 7, 1997 1:11 PM
Respond to of 80032
Cutbacks on exploration
Australian Financial Review July 8/97
By Mark Dixon, Simon Jemison and Michael O'Meara
The first casualty of the gold price plunge as companies
run down their forward sales book is likely to come in the
exploration sector.
Analysts said yesterday gold miners were likely to focus
on other commodities and higher-grade dep- osits and
the effects could be felt as early as November as current
prog- rams come to an end and decisions are made
about renewing them.
"You've got to start looking for low-cost ounces, there's
no point in looking for the higher-cost ounces," the
director of gold explorer Herald Resources, Mr Michael
Wright, said yesterday.
Gold Industry Forum figures show that in Western
Australia the industry spends about $65 on exploration
for each ounce of production, meaning that any reduction
in cash-flow could have a serious impact on the sector.
The executive director of the Queensland Mining
Council, Mr Michael Pinnock, said the plummeting gold
price would have a major impact on the amount spent in
search of gold throughout Queensland. "Five years ago,
gold exploration accounted for 70 per cent of all
exploration permits in Queensland," Mr Pinnock said.
This was down to 45 per cent before the recent fall in the
gold price.
"I suspect that the current price of gold will clearly
adversely impact on the future exploration programs not
only in Queensland but across the board."
He said Queensland deposits had been largely low-grade
and high-volume and "therefore very price-sensitive".
In Perth, Eyres Reed Ltd gold analyst Mr John
Macdonald said gold explorers could roughly be divided
into two camps: "Those with cash in the bank and those
without".
"It is going to be tough going for anyone to raise fresh
capital and you may well see some old base metals
prospects come out of the closet to be worked on," Mr
Mac- donald said. "Gold explorers don't need to change
their direction just yet, they just have to prove up their
projects and raise money on the back of the quality of
their work and deposits."
Equinox Resources NL director Mr Bruce Nisbet said he
viewed the Reserve Bank's $2.4 billion gold sales
program as "all a bit strange" and said the industry "was
used to getting nothing positive from government.
Mr Nisbet said issues such as native title, the WA gold
tax, debate over the diesel fuel rebate and now the RBA
selldown reinforced Equi- nox's decision to venture
offshore into Africa to spread its portfolio of exploration
assets.
Helix Resources company secretary Mr Rick Vittino said
Helix was "pressing on regardless" with exploration and
had recently set its budget for a $3 million program over
the next six months.
"We are not in the predicament yet of needing extra
capital for a mine or a development so we can just focus
on our exploration job at hand and worry about the gold
price later," Mr Vittino said.
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