Gold price may hit $US1200: Sino Gold

5-August-08 by AAP


Gold could rise to $US1000 an ounce again by the end of this year, before moving up to $US1200, as investors seek to insulate themselve from rising global inflation, the head of Sino Gold Mining Ltd said.

Gold's value natural a hedge against inflation in the current environment of financial market instability would continue to rise, chief executive Jake Klein said today.

As well, maturing gold deposits and fewer new discoveries are keeping supply tight and adding to the upward pressure on the price of the precious metal.

"We closed out all of our hedges on the basis that we had an optimistic view of the gold price," Mr Klein told journalists at the annaul Diggers and Dealers conference in Kalgoorlie, Western Australia.

"I think $US1,200 an ounce seems like a reasonable target.

"I'd be very surprised if we didn't see $US1,000 per ounce by the end of the year."

Gold peaked over $US1,000 in March this year at $US1,030 and is currently trading about $US890 an ounce.

The head of the Sydney-based miner also said the Australian gold sector had "some work to do to regain credibility" after recent high-profile collapses of local gold companies, such as Monarch Gold Mining Company Ltd and View Resources Ltd.

"The Australian reinvigoration of the industry has not really been successful - we've been trying to re-mine old deposits," he said.

"This industry is dependent on new discoveries and new mines coming on stream, and at the moment, it's not happening."

Mr Klein said Sino Gold, which has a focus on China, would continue to pursue gold projects in the Asian country because cash costs per ounce were too high in traditional gold mining centres such as South Africa and Australia.

He said the company would eventually expand its number of mines in China from one to four.

"It's very, very tough in places like South Africa and Australia to bring costs down because you're fighting a losing battle given the maturity of the belt that you're mining," Mr Klein said.

"Costs are certainly going up dramatically.

"Without wanting to just preach our story, I think you've got to go to new jurisdictions.

"And that's challenging as well because ... you've got to find those jurisdictions that have geological potential and manageable political risk.

"And that's where we think China has been under-recognised.

"If you speak to the majors, they say that China is difficult - and it is - it's bureaucratically complex but it's geopolitically very stable."

He said Sino Gold's cash cost per ounce at its flagship Jinfeng mine in south-west China was $US390, which compared favourably with cash costs at the Newmont Mining Corporation/Barrick Australia Pacific joint venture-operated Super Pit mine in Kalgoorlie of as mch as $US800 an ounce.

Newmont yesterday flagged the possibility of it selling its 50 per cent stake in the mine.