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http://www.thewest.com.au/default.aspx?MenuID=3&ContentID=126189

Gold expert warns on selling farm cheaply

23rd February 2009, 6:00 WST

Record gold prices have triggered a renewed warning about the rising foreign ownership of Australia’s mineral wealth amid a growing debate over China’s investment push.

With the Federal Government evaluating Chinalco’s $30 billion rescue of Rio Tinto, Melbourne research house and consultancy Surbiton Associates said yesterday the buy-out of Australia’s gold industry should serve as a reminder about the lost investment opportunities which result from short-term thinking.

Surbiton director Sandra Close said offshore miners, including Newmont, Barrick and Gold Fields, were reaping the rewards of their swoop on Australia’s gold fields between 1997 and 2003 when they bought half of Australia’s production base at a time when bullion traded at between $US380 and $US640 an ounce.

On Friday, gold futures breached $US1000/oz in New York for the first time in nearly a year, while the Australian bullion price hit a record $1564/oz.

“The sell-out occurred when the gold price was in the doldrums and share prices were low,” Dr Close said. “While Australian investors did not value the local industry, others clearly recognised its potential and acted accordingly,” she said.

“It seems Australian investors often fail to appreciate the long-term value of Australia’s mineral resources and are unaware of their strategic value and economic importance,” she said. “Yet our mineral resources, including gold, provide the best hope of paying our way in the world and reducing our escalating trade deficit.”

The sale of WMC’s gold assets to Gold Fields in 2001, and the takeovers of Acacia Resources by AngloGold in 1999 and successful bids by Newmont for Normandy Mining and Placer Dome for AurionGold in 2002, increased foreign ownership of the Australian gold industry from about 20 per cent to as high as 70 per cent. Surbiton currently puts it at 60 per cent.

Dr Close’s comments came as Surbiton released latest figures showing that Australia’s gold production fell to a 20-year low of 219 tonnes in 2008, down 12 per cent on 2007. The fall was partly attributable to rising gold prices, which persuaded more companies to tap their reserves of lowergrade ore, at the expense of output.

Kalgoorlie’s Super Pit, a joint venture between Newmont and Barrick, remained the country’s top producer, turning out 604,000oz last year, ahead of Newcrest’s Telfer mine in the Pilbara, which produced 579,232oz.

Gold prices are up strongly this year, despite a recently rally in the US dollar, as fears over the health of the global economy and financial markets push investors towards traditional safe-haven sectors such as gold. World Gold Council figures show that demand for gold bars and coins rose 87 per cent in 2008, as total global gold demand lifted 4 per cent to 3659 tonnes. December quarter demand was up 26 per cent at 1036 tonnes.

And with gold production falling, demand for jewellery in key markets such as India strong and central banks selling less, analysts say the outlook for gold prices is good.

SEAN SMITH