Gold producers including Barrick Gold Corp. and Glamis Gold Corp. are stepping up their search for acquisitions after years of reduced exploration spending eroded output and sent prices to a 17-year high.
“We are not finding gold as fast as we are mining it as an industry,” said Glamis chief executive Kevin McArthur, who failed last year in his $2.97 billion bid for rival Goldcorp Inc.
“This is developing into a bit of a train wreck,” prompting companies to consider more acquisitions to boost output, he said.
Global production last year fell to an eight-year low of 2,464 metric tons, the second decline in three years, London-based metals consultant GFMS Ltd. estimates. The drop reflects a plunge in exploration spending after gold hit a 20-year low in 1999 and reserves became more difficult to find and develop.
Toronto-based Barrick last week made a $9.2 billion bid for Placer Dome Inc. of Vancouver, British Columbia, that would lift Barrick’s output by 53 percent and create the world’s largest producer, ahead of Denver- based Newmont Mining Corp.
Reno, Nev.-based Glamis still wants to buy assets, even as the jump in gold prices made reserves more costly to acquire, McArthur said.
“The problem with exploration is you never know if you are going to succeed,” said Ian Telfer, chief executive of Toronto-based Goldcorp, which acquired Wheaton River Minerals Ltd. for $1.94 billion in February. “You can explore for 20 years and never find anything. Acquisition is much more certain.”
Goldcorp, Canada’s fourth- largest gold producer, aided the Barrick bid by agreeing to pay $1.35 billion in cash for Placer’s mines in Chile and Canada, including the Campbell mine, located near Goldcorp’s Red Lake mine in Ontario.
