Mining Industry Needs To Fund More Exploration - Barrick VP Monday March 10, 2:32 pm ET
TORONTO (Dow Jones)--Consolidation in the mining business will continue, especially among mid-cap to small producers, but the current low level of exploration spending is "untenable," a senior Barrick Gold Corp. executive said Monday at a mining convention.
As a recently rising gold price focuses investor attention on companies with the best internal prospects, this will encourage companies lacking such growth prospects to "hit the acquisition trail," Alex Davidson, Barrick's senior vice president of exploration, said.
A good deal of the "urge to merge" will come from mid-cap companies seeking to get on the big investment funds' radar screens, he said. Mergers are also likely at the junior level, particularly those scenarios which unite a cash-rich junior with a project-rich junior, he said.
But consolidation in the mining sector, which really took off in 2000, has hurt global exploration budgets, cut spending on exploration research and development, and caused some exploration experts to leave the industry, Davidson said.The disappearance of exploration dollars - as a result of consolidation, low metals prices and other factors - is sobering, he said. "One thing is certain: the current state of affairs in exploration spending is untenable for the health of our industry," he said at the Prospectors & Developers Association of Canada convention.
Big mining companies need to spend more on exploration, or else, at current annual production rates, reserves will be depleted in 10 years, he said. It can take six to eight years between making a discovery and starting mine production, and "we're not currently funding exploration at a level required to replace reserves," Davidson said.The spot gold price needs to stay at $350 an ounce, or more, for five or six years to sustain the necessary increase in exploration spending, he added.
Kinross annual output to hit 2 mln oz by 2004 Monday March 10, 2:35 pm ET By Alden Bentley
TORONTO March 10 (Reuters) - Kinross Gold Corp will not hit a two-million-ounce production target this year because a complicated merger did not close until February, but new mines are coming on stream and output will be on target by 2004, the company's chief executive said on Monday.
"The second, third and fourth quarters should be around 500,000 ounces a quarter, so the running rate in 2004 should be 2 million," Kinross Chief Executive Bob Buchan said in an interview with Reuters.
Speaking at Kinross headquarters in Toronto, he said gold prices should continue trending higher if the U.S. dollar stays weak, but prices will remain volatile amid political tensions around the world.
Buchan has steered Kinross through a three-way merger with Canadian producers Echo Bay and TVX, turning a trio of small Canadian companies into the world's seventh largest miner and joining the ranks of "senior" producers like Newmont (NYSE:NEM - News), Anglogold (ANGJ.J), Barrick Gold (Toronto:ABX.TO - News) and Placer Dome (Toronto:PDG.TO - News).
Denver-based Newmont holds a 14 percent stake in Kinross and is its largest shareholder.
Buchan said Kinross will be in a position to begin extracting gold from new ore bodies at its Birkachan property in Russia, its Refugio project in Chile and from the reopening of its Kettle River operation in Washington state next year.
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