Nov. 12 (Bloomberg) -- Lingbao Gold Co., a Chinese bullion producer, said the global credit crunch has crimped capital available for mining projects and will lead to buyouts of smaller producers.

The supply of commodities may shrink as mining companies can't fund projects, Lu Xiaozhao, executive director and deputy general manager, said late yesterday in an interview in Beijing.

The crisis has tightened lending and raised borrowing costs, potentially delaying $50 billion of global mining projects in 2009, Credit Suisse Group AG has said. Zijin Mining Group Co., China's largest gold producer, said this week it may spend as much as $3 billion on acquisitions after asset values dropped.

``Mining companies are faced with great challenges in this period,'' said Lu, who was attending a mining conference. ``The industry will speed up consolidation.''

There are about 700 gold companies in China, down from 1,200 in 2003 because of mergers and acquisitions, Lu said.

Lingbao, based in central Henan province, has made gold mine acquisitions in China's Inner Mongolia and Xinjiang provinces this year. It agreed to buy the exploration and mining rights of a gold project in Kyrgyzstan in February, and is conducting a feasibility study, Lu said.

``We won't rush into further acquisitions at this time,'' Lu said. ``We will seek good assets with good location.''

The price of gold will remain at a ``relatively high level'' for the long term, he said, without giving a specific forecast.

Gold has declined 28 percent from its March 17 record of $1,032.70 an ounce because of the threat of deflation and as investors liquidated assets to hold cash.

The price of gold could ``rise drastically'' in the short term and set another record because central banks globally will defer sale of bullion stocks during a U.S. recession, Li Xiucheng, vice president of Zhaojin Mining Industry Co. said at the same conference today. Zhaojin is also a Chinese gold producer.

To contact the reporters on this story: Xiao Yu in Beijing at yxiao@bloomberg.net; Stephen Engle in Beijing at sengle1@bloomberg.net

Last Updated: November 11, 2008 22:38 EST