Hathaway says gold market is probably manipulated

Section:

Franco-Nevada at hub of
gold merger speculation

Mining royalty firm said to show
interest in several companies

By Keith Damsell
Financial Post
(National Post/Canada)
Wednesday, May 31, 2000

The moribund gold sector was buzzing yesterday with
increasing rumours that a major merger or acquisition
is in the works.

Franco-Nevada Mining Corp. Ltd., a Toronto-based mining
royalty firm, is at the centre of much of the
speculation. In an interview with Bloomberg News
yesterday, Pierre Lassonde, president, said at least
five companies look "interesting" to Franco-Nevada,
including Gold Fields Ltd., AngloGold Ltd. and
Vancouver's Placer Dome Inc. The company has about
US$750-million in cash and interests in some of the
world's most profitable mines, including Barrick Gold
Corp.'s Goldstrike mine in Nevada. In March, Mr.
Lassonde gave a Toronto speech that declared the time
is right for mergers

"There's so much speculation going on," said Willie
Jacobsz, spokesman for Gold Fields. "We've been married
off to everybody that's got a daughter."

South African-based Gold Fields, the world's third-
largest gold producer, said last week it was in talks
"with a number of parties" that may affect its share
price. Gold Fields, along with rival AngloGold, is
anxious to diversify operations and its investment
profile beyond South Africa's borders to North America.

Gold Fields' Canadian ties are strong. A handful of the
company's executives are Canadian, including Chris
Thompson, chairman. Analysts speculate several Canadian
companies are on Gold Fields short list. It's expected
Gold Fields will have to use its depressed stock to
complete any potential transaction. The company has a
slim US$60-million in cash.

Adding to the Gold Fields-Franco-Nevada intrigue was
the conspicuous absence of both from a recent high-
profile gold conference in Phoenix.

"Where there's smoke, there's fire," said one Toronto
gold analyst who asked not to be identified. "The
reality is there's a lot of things going on in the
backrooms. Everybody is just testing the waters."

A number of analysts and firms refused to comment on
the rumoured takeover, including Toronto's Barrick,
Placer Dome and Newmont Mining Corp. of Denver. But
many industry sources agreed consolidation is long
overdue.

"Everybody's been waiting," said Chad Williams, analyst
at Toronto's TD Securities. "The industry has been
anticipating rationalization for a long time."

Gold producers lag their resource rivals when it comes
to consolidation. Over the last 12 months, oil and gas,
copper and aluminum players have joined forces to cut
costs, boost their investment appeal and gain more
control over commodity prices.

Meanwhile, the absence of creative deal-making has
diminished the sector's clout on Bay Street. The gold
and precious metals sector's weighting in the Toronto
Stock Exchange 300 index has gradually declined.

The gold and precious metals sub-index holds a measly
3.4 percent of the TSE 300's value, down dramatically
from 10.6 percent five years ago.

Only nine gold producers in the world have a stock
market value greater than US$1-billion.