Mar 6, 2007

Are gold production shortages looming ahead?

It sure looks like there's a gold production bottleneck (and prices varying accordingly ...) on the horizon. That's the moral of the following mineweb article:

Dearth of mid-cap gold companies, combined with lack of decent projects may force diversification
Dorothy Kosich
'06-MAR-07 04:00'

TORONTO--( National Bank Financial Managing Director and Mining Group head Gordon J. Bogden said Monday that a dearth of mid-cap gold companies, combined with “a shortage of decent projects” could force the diversification of pure gold companies.

In a presentation to the Prospectors and Developers Association Conference in Toronto, Bogden declared that the mining industry “shot itself in the foot” by not spending enough money for exploration, resulting in a shortage of decent projects available to gold companies.

To compound the situation, Bogden suggested that global exploration spending may not have increased quickly enough to meet today’s needs.

Bogden noted that the global pipeline of gold projects begins to dwindle after 2009. Meanwhile “marginal assets are being dusted off” and promoted as future mining projects.

The void of mid-cap gold companies needs to be filled, Bogden warned, if the future of the gold mining industry is to remain secure. Meanwhile, big players in gold mining tend to combine with other big players, leaving smaller gold companies behind, he added.

The result is a shrinking pool of fewer and fewer large and mid-cap merger and acquisition combinations available to the gold mining sector, according to the investment banker. As a result, Bogden feels the consolidation of junior mining companies is inevitable.

As good gold projects become scarcer, Bogden suggested that pure gold companies will have to look to other commodities for their future. As an example, he cited Goldcorp’s 46% holdings of non-gold assets.

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