Mostly: Classical

[amarksp]

I love gold!!
now please someone buy Minefinders....
_________________________
Acquisition Search as Gold Output Falls
Nov. 15 (Bloomberg) -- Gold producers including Barrick Gold Corp. and Glamis Gold Corp. are stepping up their search for acquisitions after years of reduced exploration spending eroded output and sent prices to a 17-year high.

``We are not finding gold as fast as we are mining it as an industry,' said Glamis Chief Executive Kevin McArthur, who failed last year in his $2.97 billion bid for rival Goldcorp Inc. ``This is developing into a bit of a train wreck,' prompting companies to consider more acquisitions to boost output, McArthur said.

Global production last year fell to an eight-year low of 2,464 metric tons, the second decline in three years, London- based metals consultant GFMS Ltd. estimates. The drop reflects a plunge in exploration spending after gold reached a 20-year low in 1999 and reserves became more difficult to find and develop.

Toronto-based Barrick last week made a $9.2 billion hostile bid for Placer Dome Inc. of Vancouver that would boost Barrick's output by 53 percent and create the world's largest producer, ahead of Newmont Mining Corp. Reno, Nevada-based Glamis still wants to buy assets, even as the jump in gold prices made reserves more costly to acquire, McArthur said.

``The problem with exploration is you never know if you are going to succeed,' said Ian Telfer, chief executive of Toronto- based Goldcorp, which acquired Wheaton River Minerals Ltd. for C$2.3 billion ($1.94 billion) in February. ``You can explore for 20 years and never find anything. Acquisition is much more certain.'

Goldcorp, Canada's fourth-largest gold producer, aided the Barrick bid by agreeing to pay $1.35 billion in cash for Placer's mines in Chile and Canada, including the Campbell mine located near Goldcorp's Red Lake mine in Ontario.

Likely Targets

The most attractive takeover targets are Bema Gold Corp., Eldorado Gold Corp. and Iamgold Corp., a Toronto-based producer involved in three failed mergers last year, Merrill Lynch & Co. analyst Mike Jalonen said in a Nov. 7 report.

Jalonen ``might be right,' Iamgold Chief Executive Joseph Conway said in an interview. ``We have exploration projects that look quite good and continue to be growing. The question is, Who? Other intermediate producers, potentially. We continue all the time to try to engage companies that we've identified and look interesting that would either be a merger or takeover candidate.'

Shares of Vancouver-based Bema surged 9.7 percent last week, after Barrick announced its bid for Placer. Eldorado Gold, also based in Vancouver, jumped 11 percent. Eldorado spokeswoman Dawn Moss declined to comment.

Scarcity of Gold

Barrick's hostile bid for Placer ``highlights to the market the scarcity of gold in the ground,' said Evy Hambro, who helps manage $12 billion of natural-resource funds at Merrill Lynch in London, including the $3.4 billion World Mining Fund. ``The gold industry today remains one of the most fragmented of commodity industries.'

World gold production fell 5 percent last year, as fabrication demand rose 5.7 percent, GFMS said.

Buying assets is appealing for companies that want to boost output and take advantage of higher prices because ``if you drill today and found a new ore body, it's between eight to 10 years' before a mine starts producing, Goldcorp's Telfer said.

Increased regulation and concern about environmental damage from mining also has prolonged the development process, company executives said. It can take up to three years to permit a mine, compared with a year a decade ago, Telfer said. At the current pace of production, the average mining company will run out of reserves in seven to eight years, he said.

Spending Decline

The industry's exploration spending fell to $784 million in 2002 from a record $2.96 billion in 1997, according to Halifax, Nova Scotia-based Metals Economics Group, which started tracking expenditures in 1989.

Spending slumped after gold dropped to $253.20 an ounce in July 1999, the lowest in two decades. Since then, gold has rallied, heading for its fifth-straight annual increase, and reached $483.10 on Oct. 12, the highest since 1988.

Gold exploration spending has rebounded to $1.77 billion last year, based on studies of 1,140 mining companies, and may jump to $2.3 billion this year, said Jason Goulden, director of Metals Economics' exploration study.

The rally in gold prices and mining-company shares may help finance acquisitions, investors said. Newmont has $2 billion in cash and short-term investments as of Sept. 30, up 19 percent this year, and Barrick shares before the Placer bid were up 17 percent from a year earlier.

Cheaper to Buy

``At the moment, assets are cheaper in the equity market,' said Hambro, the Merrill Lynch mining fund manager.

Barrick's takeover of Placer, which has undeveloped properties in Alaska, Nevada and the Dominican Republic, may yet be contested.

``We expect at least one other bid to be received, since Placer's pipeline of new projects is becoming an increasingly rare commodity in an industry where explorers are not keeping up with the miners shovels,' J.P. Morgan Securities Inc. analyst John Bridges said in an Oct. 31 report.

Denver-based Newmont may team up with Toronto-based Kinross Gold Corp. and AngloGold Ashanti Ltd. of Johannesburg to make a bid because each has existing mines or projects near those owned by Placer, Bridges said.

Kinross, Canada's No. 3 gold producer, is ``always looking at transactions in the marketplace and it usually comes down to price and the willingness of the buyers and sellers,' spokesman Christopher Hill said. ``We would prefer to operate the assets that we own.' Newmont and Anglogold declined to comment.

Slumping Profits

Consolidation also may help boost profits by increasing production and limiting the rise in mining costs, investors said.

Placer's profit plunged 76 percent in the first nine months of this year because of rising fuel costs, and the company's shares, before the Barrick bid, had plunged 24 percent from a year earlier. Newmont, heading for a third-straight annual production decline, last month said third-quarter profit fell 2.3 percent.

``The frustration for investors in the gold-mining sector is that the companies have not yet, despite the $200-move in gold price, reached adequate return on capital,' said Frederick Sturm, chief investment strategist for Mackenzie Financial Corp. in Toronto. The industry needs ``few competitors.'

After four Glamis acquisitions from 1998 to 2002 that almost doubled gold production, McArthur said he found friendly takeovers are better than hostile bids that ``are very difficult from a human standpoint and many times destroy value.'

Glamis' first-quarter profit fell 76 percent to $2.2 million, or 2 cents a share, because of $4 million in expenses for its failed bid for Goldcorp.