By Nicole Mordant
VANCOUVER, British Columbia (Reuters) - Bonanza goldfields or new mega mergers hold the key to further growth at the world's biggest mining firms, but both methods have some risks, gold mining analysts said.
The analysts, speaking at last week's Prospectors & Developers Association of Canada conference, said exploration faced funding concerns as gold prices sagged from 1997-2002, and that left problems for producers trying to use that route to expand.
"It's difficult for the senior gold producers to become growth vehicles, as there are likely few substantial greenfield projects available over the next few years," Gordon Bogden, of National Bank Financial's investment banking division, told the conference, an event that drew more than 7,000 delegates this year.
Only a handful found elephant-sized deposits during the 1990s, he said.
Combined, the top five gold miners produce about 30 million ounces of gold a year, or about a third of annual global output. This needs to be replaced by new, unmined reserves if production levels are to be maintained, let alone expanded.
Firms like world No. 1 producer Newmont Mining Corp.
Michael Chender of Metals Economics Group said the obvious answer to finding bigger deposits was a greater amount of more efficient exploration, but activity had been seriously underfunded in recent years.
He said there were enough years of potential production in the mine development pipeline, but a lot of it was high cost and too small for major companies to develop.
This meant giant producers might have to start developing more, smaller deposits, while the whole industry might have to shift focus from growth to margin -- becoming less obsessed with finding ounces and more concerned with cutting costs.
Delegates said mergers and acquisitions, which created the gold giants, remained a growth avenue. But this was a once-off production kicker and did not replace reserves.
Joseph Conway, chief executive of Iamgold
Geoff Breen of J.P. Morgan Securities in Australia, whose gold industry is now mostly in foreign hands after a swathe of mergers, said consolidation has not yet run its course.
Tanya Jakusconek of National Bank released a report
coinciding with the conference weighing up the pro's and cons
of Newmont merging with Barrick or rival Placer Dome Inc.
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