Australia's gold sector has been warned that companies with good projects here or overseas will increasingly be targeted for acquisition as the global gold market undergoes significant transition because of cost and exploration pressures.
Addressing the 2007 Paydirt Australian Gold Conference in Perth today, World Gold Analyst publisher, Mr Paul Burton, said the pattern of global gold production had shifted away from the "Big Four" producers - South Africa, the United States, Australia and Canada
"What we have seen in just 10 years is a marked falloff by these Big Four - South Africa output is down 41% for example and Australia's output has collapsed 16%," Mr Burton said.
"South Africa used to command 21% of global gold output but is now down to 12%.
"They are losing share to the 'new' gold producer countries such as China, Russia and Peru.
"China for example is now the third largest producer in the world and will increase that further as the thousands of small domestic gold mines which have been unconsolidated, undercapitalised and inefficient, give way to foreign ownership and modern exploration, mining and processing."
Mr Burton said the change trend was occurring at a time gold production had peaked - impacted by the five year low gold price up until 2001, the Bre-X scandal, exploration cutbacks, few discoveries and little or no new production coming on.
Exploration expenditure was not being inflation adjusted, grassroots budgets were actually in decline yet input costs had risen.
"Increased consolidation equals budget cuts on exploration which in turn precipitates heightened merger and acquisition activity," Mr Burton said
"The gold price climbed 24% in 2006 but cash costs by comparison have risen 19% over the same period.
"The majors are struggling to replace resources and will continue to lose ground to 'new' regions unless they cut costs to maintain a premium for their higher grade gold reserves.
"They should also consider focusing on multi-metal opportunities rather than singular gold assets as those with good gold projects will be targeted for acquisition and the merger and acquisition market is already placing a value on these ounces.
"This can be as much as US$150 per ounce in South America ranging down to 'new' regions such as Asia where in-ground ounces can attract less than US$25 an ounce - and therefore offer substantial upside potential."
