Dec. 15 (Bloomberg) -- Barrick Gold Corp., the world's biggest gold producer, may make a bid for Freeport-McMoRan Copper & Gold Inc. to boost reserves and lower operating costs, CIBC World Markets Inc. said in a research note.

Barrick, which acquired Placer Dome for $10 billion in March, will see its gold output drop 4.2 percent next year as costs increase because of some declining ore grades, CIBC analysts Cosmos Chiu and Barry Cooper said. New Orleans-based Freeport owns the Grasberg mine in Indonesia, the world's biggest gold mine and the second-largest for copper.

``We note that the company's production profile and costs will trend unfavorably for 2007,'' the CIBC analysts said. Toronto-based Barrick ``may make a play for Freeport before it becomes a total copper company. Such an acquisition would be accretive under most assumptions.''

Barrick's cash costs per ounce of gold produced may rise by as much as 18 percent in 2007 because of a decrease in grades to be processed, partly a result of processing material re- classified to ore due to higher gold prices, spokesman Vince Borg said in an e-mail.

Bid for Phelps Dodge

``We have a policy of not commenting on rumors, speculation and suggestions,'' Borg said. Freeport spokesman William Collier responded similarly.

An offer by Barrick may disrupt Freeport's bid for Phoenix- based Phelps Dodge Corp., the world's third-largest copper producer. Freeport wants to reduce its dependence on the Grasberg gold and copper mine in Indonesia and add copper assets. The combined company would get three-quarters of its sales from copper.

On Dec. 11, SAC Capital Advisors LLC, the $10 billion hedge-fund firm run by Steven Cohen, raised its stake in Phelps Dodge to 5.1 percent and said it would oppose a takeover by Freeport.

Shares of Freeport closed 35 cents, or 0.6 percent, higher at $60.08 in New York Stock Exchange composite trading. Freeport has gained 12 percent this year. Barrick fell 58 cents, or 1.6 percent to C$35.12 on the Toronto Stock Exchange and are up 8.4 percent in 2006.

To contact the reporter on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

Last Updated: December 15, 2006 16:33 EST