Rise in oil price is driving the rush to gold: Newmont MD

The global rise in oil prices is driving the rush to gold as a haven against inflation and fuelling the increase in international prices for the precious metal to near record levels, according to one of Australia's most experienced gold industry executives.

Mr Paul Dowd, the outgoing Managing Director of Newmont Australia Ltd, told the 2006 Gold Conference in Perth last night that the impacts of rising fuel prices were now having a severe impact on inflation - and gold.

"As gold is a natural haven against inflation, we are seeing for the first time, a rising gold price in virtually every single currency around the world," Mr Dowd said.

"It is our belief however that the gold price has a long way to go yet, as not only is it becoming the investment of choice, but people are getting into gold for a number of factors - but none more so than demand is exceeding supply from mine production.

"Analysts expect total gold production to rise in 2006 and 2007, be flat in 2008 and decline by 2009. This is in an environment where there has not been a significant gold discovery in Australia in the past six to seven years.

"We are continuing to pay the penalty for turning off the exploration tap and even if we reported a major discovery, it would be 5-10 years before it came into production."

Mr Dowd warned that gold producers would have to continue to maintain downwards pressure on costs, despite the punishing impact of higher oil and steel prices on production infrastructure.

"We have all suffered in this regard but I believe the worst is over and we should soon start to see some improvement in margins."

Boddington gold project update

In a Boddington gold project update, Mr Dowd told the Conference the estimated capital cost for the revitalised mining proposal for Boddington was now between A$1.8 billion and A$2 billion.

Escalating steel prices and ensuring Newmont had sufficient quality personnel and high class mine village accommodation to help attract and retain personnel, were key contributors to the project's cost rises.

Newmont has a two thirds interest in Boddington with the remaining one third held by Anglogold.

"The Boddington project would probably not have been possible 10 years ago but such has been the change in the gold market and the risk profile of the market that world-class sites like Boddington can now have their time," Mr Dowd said.

Construction of the mine infrastructure is scheduled to commence in the current June 2006 quarter with the mine expected to be commissioned by the end of 2008.

The operation would employ 650 people permanently with a workforce of 1,000 people during construction.