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Newmont acknowledges considering counterbid for Placer Dome
Newmont Forecasts Gold to Rise
Above $1,000 on Asian Demand
By Miriam Steffens
Bloomberg News Service
Sunday, November 27, 2005
http://www.bloomberg.com/apps/news?
pid=10000080&sid=aotpaNV5Qtpw&refer=asia
SYDNEY -- Newmont Mining Corp., the world's largest producer of
gold, says the price of the precious metal may rise to more than
$1,000 an ounce in the next five to seven years as demand growth
driven by Asia outstrips global supply.
The gold market "is hot and it is going to get hotter," Denver-based
Newmont's President Pierre Lassonde said in an interview on
Australian Broadcasting Corp. television today. "By early next year
you are going to see $525 and down the road even a lot higher than
that."
Gold for immediate delivery touched $497.02 on Nov. 25, the highest
intraday price since December 1987, as Japanese investors bought
bullion to hedge against inflation and jewelers in Asia and Europe
stocked up. Lassonde's prediction surpasses a Merrill Lynch & Co.
forecast in July that gold may rise to $725 by 2010 because of
rising demand from China.
"When any of these markets get momentum behind them, you tend to
find some pretty outrageous calls," said Mark Pervan, head of
resources research at Daiwa Securities SMBC Australia in
Melbourne. "There's going to be a lot of gold calls made in this
environment; it's similar to the oil market about six months ago
when people" were saying oil may reach $100 a barrel, he said.
Gold may top a record $873 during the next three years because the
U.S. will be unable to check inflation caused by rapid growth in
China and India, William Gary, a publisher of newsletters with
subscribers that include hedge fund Tudor Investment Corp., forecast
last month.
Some investors buy gold to hedge against accelerating inflation.
Gold futures surged to $873 an ounce in 1980, when U.S. consumer
prices rose more than 12 percent from the previous year. Gold last
climbed above $500 an ounce on Dec. 11, 1987.
"Everybody thinks inflation is going to stay at 2 percent. I don't
believe it," said Lassonde. "There has been way too much money
printing in the world for that to happen."
Inflation, excluding food and energy, will probably rise 2.4 percent
by the fourth quarter next year from this quarter, up from a 2.1
percent gain a year earlier, a survey by the National Association
for Business Economics found.
Newmont said Oct. 26 third-quarter profit fell 2.3 percent to $126
million as output dropped 6.8 percent, eroding the benefit of rising
gold demand and prices.
Worldwide gold production last year had the largest decline in 39
years, Lassonde said. Demand in India, the world largest consumer,
rose 47 percent last fiscal year, and 14 percent in China, the
world's fastest growing economy, he said.
The decline in output will continue "for at least another couple of
years simply because the industry didn't put money back into the
ground when the gold price was very low," Lassonde said. "On the
other side demand is just surging everywhere. It is driven mostly by
Asia, China, and India."
The price of gold may rise above $500 in the "very near future,"
Barrick Gold Corp. Chief Executive Gregory Wilkins said in an
interview in Toronto Nov. 18. Still, Australia & New Zealand Banking
Group Ltd. analyst Craig Ferguson said in an Nov. 22 report that
gold may fall as low as $455 in the next three months.
Gold has rallied from a 20-year low of $253.20 an ounce in 1999
partly because 15 central banks in Europe, including Germany, agreed
to limit their annual bullion sales to 400 tons through 2004. The
banks, under a second agreement that began last year, increased the
annual limit to 500 tons. Central banks, mainly in the U.S. and
Europe, hold almost a fifth of the world's gold as a reserve asset.
Lassonde's forecast "is an ambitious target considering that central
banks hold a lot of gold and at $1,000 it looks very attractive to
sell," said Daiwa's Pervan.
In 2004, central banks sold 475 tons of gold, contributing 14
percent to global production, which included mine output and sales
of scrap bullion, according to the World Gold Council.
Lassonde said he was undecided if Newmont should make a takeover bid
for Placer Dome Inc., Canada's second-largest gold producer. Placer
is fending off a $8.93 billion hostile takeover bid from Barrick,
the world's third-largest gold miner, and said last week it's
seeking alternative transactions.
"It would be fair to say that we have to at least think about it but
whether or not we are going to do something is far from evident," he
said. Still, "the suite of assets is not entirely complimentary to
what we have at Newmont."
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