Big-game hunting Canadians jostle for African gold supremacy

Miners are chasing capital as they wager higher gold prices will bring more production into play - and that means its off to Africa

TORONTO (Reuters) - 

Canadian miners are jostling for position in gold-rich Africa, chasing capital to fund new production as they wager gold prices will hold near-record levels for years to come.

Gold is trading at over $1,000 an ounce, several times what it was a decade ago, and miners, many of them Canadian, are looking to cash in by bringing new production on as soon as possible.

For many, that means mining in Africa, and brokerages are fielding calls from companies eager to finance work on the politically sensitive continent.

"If you want to go elephant hunting, you have to go to elephant country," Mark Bristow, the chief executive of London-based Randgold Resources (RRS.L: Quote), told investors in Toronto, repeating a favorite refrain in lauding Africa's gold riches.

Bristow is in the midst of a major bid to build his company's presence in central Africa, where risks run high, but potential rewards run higher.

Partnered with fellow African miner AngloGold Ashanti (ANGJ.J: Quote)>, Randgold bid C$546 million ($510 million) in August to buy Toronto-listed Moto Goldmines (MGL.TO: Quote), whose key assets are in the mineral-rich Democratic Republic of Congo, home to massive gold assets, and lawless bandits.

Randgold's bid beat out an attempt by Canada's Red Back Mining (RBI.TO: Quote) to acquire Moto.

"At that ($1,000/ounce) price point, a lot of mining assets that are undeveloped become very profitable enterprises, and so we have seen a very busy M&A market in precious metals recently, and the best example of that is Randgold's acquisition of Moto," said Dan Barclay, head of mergers and acquisitions, Canada, for Bank of Montreal (BMO.TO: Quote).

He said the bank's investment banking arm, BMO Capital Markets, has seen increased appetite for capital by companies in African mining, especially in gold and precious metals.

Canada has one of the highest concentrations of mining equity in the world, and many of its gold producers are actively looking in Africa.

Earlier this year, Toronto-based Iamgold (IMG.TO: Quote) bought junior miner Orezone to acquire its Essakane gold project in Burkina Faso, and then issued C$345 million in stock to fund construction of the project.

NO EASY TASK

But with much of the world still crawling out of recession, financing is difficult even for gold producers.

To win investors' favor, a company needs to show its mineral deposit is big enough and cheap enough, and has an acceptable level of political risk -- three variables that often conspire to eliminate some projects from the get go.

"When the watering hole shrinks, animals look at each other differently," Kim Harris, chief executive at Canada's Midlands Minerals (MEX.V: Quote), said of the availability of financing.

Harris, a Canadian born in Zimbabwe, knows all about political risk after she and her company were driven out of Zimbabwe amid civil strife at the end of the last decade.

These days she operates in Ghana and Tanzania, where gold mining has attracted billions of investment dollars.

"Mining is no stranger to Africa," she said. "It is not new to the Congo, or South Africa. It is certainly not new to Ghana, where they have over 200 years of mining history."

Harris, who is seeking to raise $6 million to restart her Ghana mine, also predicted a pick-up in mergers and acquisitions among companies operating in Africa.

She said her company has been approached several times, and Bristow said Randgold had also seen interest from buyers.

Bruce Shapiro, president of the MineAfrica organization that promotes mine investment in Africa, said Africa is becoming more attractive to investors as its nations slowly become more transparent and democratic.

"But the obvious reason is that the resources in Africa are underdeveloped and enormous," he said last week on the sidelines of the MineAfrica investor event, which was co-sponsored by the Canada-South Africa Chamber of Business.

Democratic Republic of Congo, home to some of Africa's most promising gold deposits, is seen doubling growth next year, helped in large part by a recovery in the mining sector, Budget Minister Michel Lokola said last week.

The question is who will lead the charge.

"You know, the Canadians are always first in," said Bristow. ($1=$1.07 Canadian) (Additional reporting by Cameron French; editing by Janet Guttsman)

© Thomson Reuters 2009 All rights reserved

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