CANADIAN MINING PERSPECTIVES: VIEWPOINT Ranks of mid-tier gold producers expand

Looking around this week's merger news, I have spotted what may be a coming trend. It is not the hotly contested ho...
Looking around this week's merger news, I have spotted what may be a coming trend. It is not the hotly contested hostile offer, but the merger of equals to create a new group of mid-tier gold miners. These are not players given to a lot of flash on the corporate stage. They are quietly going about their business now with increased resource and production hopes.

The shareholders of Montreal-based CAMBIOR have voted in favour of the offer from Toronto's IAMGOLD CORP. Cambior's focus is largely in Canada; IamGold has two producing mines in Africa. The new IamGold is looking to double both its resource base (to 28.9 million contained oz of gold) and gold production (to over 1.0 million oz/year beginning in 2008). The combined company has a market capitalization of US$3.0 billion.

The directors of Toronto's KINROSS GOLD have voted in favour of a deal to acquire BEMA GOLD of Vancouver. The merger will create a gold producer worth US$7.9 billion. The assets include nine mines that together are expected to produce 2.8 million oz of gold beginning in 2009. The new Kinross will boast 50 million oz of gold, 80 million oz of silver and 2.9 billion lb of copper in the ground. Bema shareholders will vote on the deal during a special meeting early in January 2007.

AGNICO-EAGLE MINES of Toronto has grown independently, without the need to hitch its wagon to any other company. The company predicts it will produce 750,000 oz of gold yearly beginning in 2009. While it won't rival Kinross in size, Agnico-Eagle has some very bright prospects for growth. Its Laronde mine in Quebec is a steady producer and if LaRonde II is developed, as many as 6.7 million additional ounces of gold may be mined from that property. Plus Agnico has growth projects in Canada (1.7 million oz at Lapa and 1.8 million oz at Goldex), Finland (Kittila with the potential for 3.5 million oz) and Mexico (2.1 million oz of gold in the resource at Pinos Altos).

Shareholders of Vancouver-based NOVAGOLD have thumbed their collective noses at the takeover attempt made by Toronto's BARRICK GOLD. They "overwhelmingly" rejected the larger company's offer, trusting that NovaGold stands to join the ranks of mid-tier producers on its own. Development of the Galore Creek mine in British Columbia will give NovaGold production numbers of at least 520,000 oz of gold and 432 million lb of copper annually by 2011. If the company gains total control over the Donlin Creek project in Alaska, its annual gold numbers would rocket to 1.84 million oz yearly.

Other mid-sized producers have grown into the ranks of the majors thanks to mergers. I am thinking of Vancouver-based GOLDCORP, that snapped up assets of the former Placer Dome when the latter company was bought by Barrick. Goldcorp, despite the objections of its largest shareholder, has completed its acquisition of GLAMIS GOLD of Reno, Nevada. It now has a resource base of 86.0 million oz of gold in all categories. Worth over US$21 billion, Goldcorp has certainly created a place for itself among the majors.

As one company grows out of the mid-sized ranks, a place is left for another to replace it. ST ANDREW GOLDFIELDS of Oakville, Ontario, is a likely candidate. It recently agreed to purchase both the former Holt-McDermott and Holloway gold mines from NEWMONT CANADA. Added to St Andrew's nearby projects and its Clavos gold mine in northern Ontario, the potential is there to get the ball rolling for more growth in the gold sector.


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