The last few weeks has seen a startling rise in fuel and food prices. This has been a key contributor to the political and economic instability overseas; it’s also paving the way for an even bigger crisis for the U.S. and the world economy by 2012.

Indeed, the oil price has been on a rip-and-tear largely owing to the Middle East crisis. The fear and uncertainty overhanging North Africa and the Middle East has also benefited the gold price. Our favorite gold proxy for instance, the SPDR Gold Trust ETF (GLD), recently made a new high and is still above its key immediate-term trend line.

Anglo-Tanzanian miner African Barrick Gold PLC (ABG.LN) whose parent is Canadian mining company Barrick Gold Corp (ABX) plans to develop its Golden Ridge project in Tanzania as a satellite to its existing Buzwagi gold mine from 2013, the company’s chief executive said Tuesday.

African Barrick Gold expects to produce 50,000 troy ounces of gold annually from the Gold Ridge project, making it a key component of the company’s growth strategy to increase production by 40% by 2014.

The mining company, whose parent is Canadian mining company Barrick Gold Corp (ABX), previously said it is targeting gold production of one million troy ounces by 2014, up from around 700,000 ounces, via brownfield and greenfield expansions. It also expects to pursue production growth through mergers and acquisitions.

“Last year we outlined four projects that represented strong organic growth. Golden Ridge was one of those projects,” he said. The projects include an underground mine at North Mara, life extension at the Tulawaka mine and rehabilitating access to the Upper East Zone of the Bulyanhulu mine. Each of these projects is expected to add about 50,000 ounces of additional gold output, Hawkins said.

Aside from organic-growth plans, African Barrick Gold also plans to use its $400 million cash war chest to diversify its geographic reach beyond Tanzania, Hawkins said.
“We’re going to be [in Tanzania] for a long time but we also see a strategic need to diversify,” he said. The company has looked at a dozen potential transactions already, half of which resulted in a closer investigation, Hawkins said.

The company is interested in assets in northeast Africa and West Africa. Assets in northeast Africa are located primarily in Eritrea and Ethiopia and, to a lesser extent, in Egypt. Egypt is “probably not our favored destination even before” the unrest, Hawkins said, referring to the popular uprising that led to the ouster of its long-time president Hosni Mubarak. In West Africa, the company is interested in locations such as Mali, Burkina Faso and Senegal, Hawkins said.

He acknowledged that gold-asset valuations are pricey at the moment. “We have to exercise a bit of patience,” in order to find the asset that is right for the company, he said.
He noted that the company has looked at a range of assets but wouldn’t look at any projects that would drag the average cost of its projects up by too much.

Hawkins said the company’s operations sit just below the mid point of the gold industry’s cash-cost curve, which is $570/oz to $580/oz.

Hawkins said he remains bullish about gold prices in the long term. He said he expects gold could top $1,500 a troy ounce in 2011, a similar trend echoed by Randgold Resources Ltd. (GOLD, RRS.LN) CEO Mark Bristow. Hawkins also noted that the jewelry market seems to be adapting to the new gold-pricing environment, as evidenced by the fact that, when the price of gold falls by $100/oz, jewelry demand picks up.

Exchange-traded funds are also providing a new source of demand while central banks, such as China’s, are showing appetite for the yellow metal. From a supply perspective, “the cost curve of the industry has marched upward,” which has provided a higher support level for gold prices, Hawkins added.

Separately, Hawkins said access to electricity is an issue for the company in Tanzania but he is encouraged by the Tanzanian government’s efforts to boost output and transmission-line capacity.

Gold output in South Africa increased the most in more than 30 years in January as prices traded near a record high amid demand for alternative assets. Mining companies produced 15.1 percent more gold during the month than they did a year earlier, a monthly report from Statistics SA showed yesterday. It represents the biggest monthly increase since at least the beginning of 1981.

Gold production in January was skewed by exceptionally low output a year earlier, Martin Kohler, the deputy director of statistics at the national directorate of mineral economics, said yesterday, without commenting further. Gold rose 22 percent to an average during the month of $1 359.98 an ounce (R301 438 a kilogram), from $1 116.56 a year earlier. The precious metal reached a record $1 444.95 an ounce on March 7 as violence in Libya boosted demand. Total mine production rose 4.3 percent in January from a year earlier, Stats SA said. Iron ore fell 36 percent and platinum rose 14 percent. – Bloomberg

West Africa is literally elephant country for gold mining – hosting world-class gold deposits in Ghana, Mali and Guinea that include Obuasi (past production and current reserves of 42 million ounces), Bibiani (5.0 million ounces), Syama (5.2 million ounces), Morila (5.9 million ounces), Sadiola (14 million ounces) and others. In addition, West Africa has had the fastest growth in gold production in the world over the past five years.

Burkina Faso accounts for 21% of West Africa’s Greenstone Belt Exposure. This mineral potential is being investigated by a number of mining companies, some of which are outlined HERE

Burkina Faso is a politically stable country adjoining Ghana and the belts of favorable rocks that host all of the major gold deposits in Ghana continue on into Burkina Faso. While Ghana’s well-documented exploration successes have resulted in a scarcity of available geological prospects, some area’s of Burkina Faso have been severely under-explored.

Some of the most important types of gold deposits in West Africa are shear-hosted vein deposits which occur in Birimian Greenstone Belts, composed of Lower Proterozoic volcanic or volcano-sedimentary rocks. This geological setting is analogous to the prolific Precambrian gold belts of eastern Canada and other parts of the world; however, West Africa has received only a small fraction of the exploration coverage that those other belts have experienced. In particular, Burkina Faso has undergone less than 10 years of modern exploration, starting in the mid-1990s, with little activity occurring between 1999 and 2003. It thus remains under explored even in comparison to neighbouring Ghana and Mali, which both host world class gold mines in the same belts of Birimian rocks. Therefore, management believes there are compelling opportunities for further major discoveries in this region.

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