06/12/2005 - 21:00

Juniors bank on gold’s glint

06/12/2005 - 21:00

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Australian gold production is tipped to rise next year amid renewed enthusiasm for local stocks, reflected in big deals and soaring junior share prices.

Juniors bank on gold’s glint

Australian gold production is tipped to rise next year amid renewed enthusiasm for local stocks, reflected in big deals and soaring junior share prices.

Highlighting consolidation in the sector, a deal between Gallery Gold and Canadian group IAMGold Corporation worth $270 million was signed this week, with the foreign investor planning to buy out all of the shares in the West Perth-based company.

The merged group is expected to hold interests in five operating mines in Africa, about 4.6 million ounces of gold in reserves, and annual gold production of about 575,000 ounces.

And according to senior Hartleys resources analyst Rob Brierley, the market is poised for further consolidation as larger groups sidestep the lack of exploration in recent years and buy into more established assets.

“Most companies are sitting on declining reserves and I think you’ll continue to see more activity in the mid-cap ranks,” Mr Brierley said.

Local gold miners planning to bring projects online next year include Allied Gold and View Resources, both of which have moved to capitalise on higher margins in the metal.

But the strength of the move into juniors has been “quite extreme”, according to Mr Brierley.

While the number of juniors stepping up their drilling campaigns continues to rise, a shortage of drilling rigs has prompted vertical integration at Perseus Mining.

The Reg Gillard-chaired Perseus this week announced some promising drill results from its Obdilla prospect in the Kyrgyz Republic. Its shares have risen from an issue price of 20 cents a year ago to 35 cents in recent trading.

Perseus managing director Mark Calderwood said the junior had listed at a difficult time for gold in September last year, but current margins would mean a return of $20 million for its company starter Grumesa project in Ghana, expected to come on line within eight months.

“Grumesa can operate at a cost of between $US300 and $US320 [an ounce],” Mr Calderwood said.

Perseus owns its own drill rig, currently operating in West Africa.

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