Newmont Mining Corp. said it favors expanding its gold operations in Ghana over buying mines in South Africa, the world’s largest source of the metal, deeming the ore bodies there too deep and old.
Ghana will become a core operating region for Denver-based Newmont as it boosts its gold reserves above their current level of 16 million ounces this year, chief executive Wayne Murdy said Wednesday. The company will make “targeted acquisitions” and continue its policy of not investing in South Africa, he added.
“We don’t see where we can add value in that equation; we’re not deep-level gold miners,” Murdy said in a televised interview at the World Economic Forum in Davos, Switzerland. “South Africa is obviously well-endowed with gold, but what you see are older mines that are playing out.”
Gold gained for a fifth year in 2005, the longest winning streak in 30 years, and rose to $568.10 an ounce Jan. 20, the highest since 1981, as a weakening dollar spurred demand. The metal also gained because of a decline in global output, which dropped to an eight-year low in 2004, prompting the biggest companies to seek expansion through acquisitions.
An offer for Canada’s Placer Dome Inc. to rival that made by Barrick Gold Corp. “didn’t make a lot of sense,” Murdy said.
Placer Dome’s operations span North America, Australasia and South Africa, where a sixth of the world’s gold is mined.
Barrick, based in Toronto, will overtake Newmont and South Africa’s AngloGold Ashanti Ltd. next month as the world’s largest gold producer when its offer for Vancouver-based Placer Dome closes.
Murdy also said the environment is “well-situated” for the gold price, which will rise as the dollar declines against Asian currencies.
The recent increase in the price of bullion to its highest level in 25 years has been driven by the weakness of the dollar against Asian currencies, Murdy said.
The dollar will decline “not against the euro – the real story for the dollar is against the Asian currencies,” he said. “As long as the balance of payments continues on its current path, we don’t see that changing very much.”
Declining gold production will continue, as will increased demand from investors for gold, giving further impetus to the price, Murdy said.
