A WEAK Australian dollar, production costs among the lowest in the world and a stable political climate has made Australian gold companies attractive targets during the past year.
North American and South African producers have been in Australia with open wallets of late.
South Africans producer GoldFields has snapped up part of WMC’s 750,000-ounce-a-year gold division with the purchase of St Ives and Agnew, and then merged with Delta Gold.
Not to be outdone, fellow South African producer Harmony Gold took over New Hampton Goldfields earlier this year and has taken an equity interest in Bendigo Mining and Goldfields. More than 10 deals were done during the year, reducing the numbers to only four major players – Delta/Goldfields, Anglo-Gold, Homestake Gold of Australia and Placer Dome Asia Pacific Ltd.
CIBC Eyres Reed resource analyst John MacDonald said while the industry was experiencing better trading times than in the past, margins still remained tight.
“When it’s hard to make money you tend to look at your competitors for opportunities. It has (mergers) always been driven by the need to reduce production and admini-stration costs to maintain the competitive edge,” Mr MacDonald said.
A investor flight to safety will be the prime influence on the future of gold prices, and the future plans of the gold industry.
“When you combine the inflationary outlook with the current worldwide political and economic uncertainty, you have the perfect environment for a revival in gold investment demand,” Gold Corporation CEO Don Mackay-Coghill said.
And it is this expectation of increased investor interest that is driving small gold companies into the main game.
Australian Gold Council CEO Greg Barns said while the pickings among the top gold stocks were thin, an array of new players were coming through with money to spend.
He cites Bendigo Mining, Hill 50, Barra Resources, Gindalbie Gold, Dominion Mining, Charters Towers Gold Mines as companies that could emerge as the next giants.
