Newmont’s O’Brien Sees Gold Rising to $1,350 in 2010 (Update2) Share Business ExchangeTwitterFacebook| Email | Print | A A A By Doug Alexander and Rob Delaney
Dec. 2 (Bloomberg) -- Newmont Mining Corp. Chief Executive Officer Richard O’Brien said gold may rise to $1,350 an ounce next year and reach as high as $1,500 within two years because of the declining dollar and renewed investment demand.
“I’d say next year we could maybe see as much as a $150 improvement,” O’Brien said today in an interview in Toronto. “There’s still that continued push on U.S. dollar decline, still inflation.”
Gold surged to a record for the second straight day as central banks, pension funds and individuals bought the precious metal as a hedge against potential currency debasement and inflation. Gold futures touched an all-time high of $1,218.40 an ounce in New York and bullion priced in sterling, euros and Swiss francs also set records.
“The increase in demand in general for investments has more than offset that decline for jewelry,” O’Brien said. Gold could trade in a range of $1,000 to $1,500 an ounce in “the next couple of years.”
Newmont, the world’s second-largest gold producer by sales, rose 17 cents to $55.83 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 37 percent this year.
Higher bullion prices may make it more difficult for the Greenwood Village, Colorado-based company to expand through acquisitions, O’Brien said.
‘Difficult Acquisition Environment’
“With the rise in gold price, a lot of the stocks have rallied, people have access to capital again,” O’Brien said. “It’s probably a more difficult acquisition environment than it was a year ago.”
Newmont will build on its existing deposits and projects while watching for “opportunistic” acquisitions, O’Brien said.
“We’re looking in places around the world where we see terrains of interest,” he said, identifying Indonesia, Australia, Alaska and the Arctic and “challenging” political areas.
“We’re up for the challenge, we just have to find the right discoveries,” O’Brien said.
Newmont aims to increase its annual production of gold by 5 percent to 10 percent next year, O’Brien said. The company said in October that its 2009 gold sales will be about 5.2 million ounces.
“We’re going to try to maintain our production profile that we have today, that 5 to 5.5 million ounces, keep that going into the future, invest in new projects to help sustain that, and every once in a while if we find something interesting in the market acquire that,” he said.
Open to Collaboration
O’Brien said he’s open to collaborating with Barrick Gold Corp. in Nevada. He cited as an example the joint venture between BHP Billiton Ltd. and Rio Tinto Group on iron-ore operations in Australia.
“You see in BHP and Rio, the way they’ve attacked the iron-ore business, that there are certainly ways without destroying value to actually put operations together and generate synergies,” O’Brien said. “If there’s a way to do that so that each of our shareholders comes out in a better spot, we’d be up for it.”
BHP abandoned a hostile bid for Rio in November 2008 because of falling commodity prices and Rio’s debt levels. The companies agreed in June to combine iron-ore assets in Western Australia to save more than $10 billion.
Such cooperation generally makes sense, though “it’s the details of these things which swamp the ideas,” O’Brien said. “In practicality, it hasn’t gotten done today and Newmont and Barrick have been together in Nevada for 25 plus years.”
Newmont forecast its operations in Nevada will account for about 37 percent of its output this year.
DSE Price at posting:
2.1¢ Sentiment: Buy Disclosure: Held
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