G-Resources Sees Gold at $2,000 an Ounce on Supply Constraints

G-Resources Group Ltd., whose development of a gold mine in Indonesia has been delayed by six months, said prices may reach $2,000 an ounce because of supply constraints and investment demand.

“We’ve got no doubts you’ll see spikes up to $1,500 and probably $2,000 over the next few years,” G-Resources Vice Chairman Owen Hegarty said in an interview. “Demand is strong and is only going to get stronger. Constraints on supply have seen production fall in past decade, and the discovery and development of new mines just hasn’t caught up.”

Gold reached a record $1,265.30 on June 21 as investors sought to protect their wealth against financial turmoil and declining currencies. Hong Kong-based G-Resources said yesterday that floods had increased the costs of its Martabe project by $80 million to $440 million.

“We still have enough money in the bank to pay those extra capital costs,” Hegarty said in an interview on July 23. The company is targeting full-year output of 250,000 ounces.

G-Resources rose 1.4 percent to 36 cents at 9:50 a.m. in Hong Kong. They’ve dropped 27 percent this year. The Martabe start-up was delayed to the fourth quarter next year, the company said July 11. Its earlier target was the first-quarter.

“It’s cost us six months in time,” Hegarty said.

Hiring Leighton

Leighton Holdings Ltd. was awarded a $150 million contract for an initial 65 months to operate mining services at Martabe, G-Resources said today in a statement to the Hong Kong stock exchange.

G-Resources sold $587 million in shares last year to fund the acquisition and development of the Indonesian mine. The company is considering more acquisitions in Asia, Hegarty said.

“Indonesia in particular looks great, but we’re also looking in Malaysia, Thailand, Laos, Vietnam and China,” he said. “We’re looking at projects that already have a resource, or perhaps in projects being built by companies that need some help. We’d prefer an operation.”

Newcrest Mining Ltd., Australia’s largest gold mining company, has agreed to buy Port Moresby, Papua New Guinea-based Lihir Gold Ltd., the No. 2 producer traded on the Australian stock exchange, to create the world’s fifth-biggest gold company.

“It’s happening at the big end of town,” Hegarty said. “Newcrest has to be acquisitive because in needs to continue to add gold to its portfolio. The smaller companies will be looking toward consolidation to grow their resource base.”

UBS AG raised its 2010 price forecast for bullion to $1,205 an ounce on July 23. Bullion for immediate delivery fell 20 cents to $1,189 an ounce at 6:06 a.m. Perth time today.

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