Gold Miners Talk of Expanding; Base Metals Miners Cutting Back

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"Soaring gold prices and rock-bottom base metals have split the mining sector into camps of haves and have-nots. . ."

Soaring gold prices and rock-bottom base metals have split the mining sector into camps of haves and have-nots, with the contrast clearly evident at the BMO Capital Markets Metals and Mining conference, which wrapped up on Wednesday.

With gold prices having flirted with record highs this week and mining costs in decline, gold producers in attendance talked up expansion possibilities and tried to sell potential investors on new projects.

"It's a two-tiered market: gold and the rest," said BMO analyst Tony Robson, who helped moderate the three-day conference in Hollywood, Florida. He was speaking on a conference call.

Some top miners forecast expanding margins and acquisition opportunities, while others might sell equity to take advantage of the market's thirst for gold assets.

In contrast, base metal miners focused their discussions on cost cutting and capital preservation, laced with hopes that a rebound in prices could happen late this year.

All told, about 100 companies made formal presentations at the conference.

Prices for metals, such as copper, nickel, zinc and aluminum have dropped more than 50% over the past year as the global economic downturn has cut demand for steel and other building products.

In contrast, gold has rebounded from a selloff last year, as investors have embraced its safe-haven status and turned to it in the absence of other reliable investments.

BMO analyst David Haughton said industry players were anticipating a further near-term slide or sideways move by base metals, but a rebound might be in the offing late this year or in 2010.

The analysts said optimism on the metals side focused on China, which has become an active player in the sector.

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