At $1,000/oz., Chile catching global gold bug


By Pav Jordan
Friday, February 20, 2009

MINERA FLORIDA, Chile -- Better known in global mining as the world's top copper producer, Chile is urging miners to look for gold as prices for the precious metal flirt with record highs and buck a metals price slump.

Gold futures shot above $1,000 an ounce on Friday as long-term inflation worries, fanned by the massive U.S. economic stimulus package signed into law by President Barack Obama this week, drove investors into gold, seen as the most likely asset to hold its value if the dollar starts weakening.

Gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $24.50 to $1,001 an ounce, the highest since July 16, and analysts expect gold to rise above its all-time high of $1,033.90, hit last April.

"Traditionally Chile is a country that has focused on copper, because it is our main mineral, but we also want the country to develop into a producer and exporter of gold," Chile Mine Minister Santiago Gonzalez said this week during a visit to the Minera Florida mine.

Minera Florida, owned by Canada's Yamana Gold, is set to produce about 120,000 ounces of gold this year, or about $120 million worth of the metal.

"Gold has held prices in the face of the crisis, and has even risen, which opens great development potential in our country," he said.

Gonzalez said the Chilean government was working on a plan to provide venture capital to prospectors looking for gold, and would give credits of between $30,000 and $200,000 to explorers.

He hopes the funds, up to $2.5 million per year, and potentially huge gold projects under review for development, would help Chile become a significant gold producer in just a few years.

"Chile can develop its gold mining. ... We can reach 100 tonnes per year in the short term," Gonzalez said.

Chile produces about 40 tonnes of gold per year, making it the world's 15th largest producer of the metal, behind closest rivals Mexico and Argentina.

That could rise quickly, however, if Canada's Barrick Gold Corp. puts its Pascua Lama gold property into production.

Pascua Lama, one of the world's last known mega-gold finds, is located in the Andes mountains between Chile and Argentina, about 5,500 meters (18,000 feet) above sea level. It is said to hold some 18 million ounces of gold.

Standing near the mouth of the Minera Florida mine in central Chile, Yamana Gold Chile manager Ricardo Palma Contesse says the country potentially holds many more mid-size deposits.

"I would say that Chile has a high potential for medium-sized mines like this one, not huge ones like our copper mines, but mines like this one," Palma told Reuters.

Chile's neighbor Peru, the world's fifth-largest producer, churns out more than 160 tonnes of gold per year.

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