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A promising gold project in Argentina has sparked a bidding war between two Vancouver-based producers as miners battle for the world's shrinking supply of gold reserves.

Goldcorp Inc. , the world's second-largest gold miner, has struck a $3.6-billion cash-and-share agreement with Australian-based Andean Resources Ltd. , trumping a $3.4-billion all-share offer from smaller rival Eldorado Gold Corp.

While Goldcorp's offer is higher and its commitment with Andean stronger, Eldorado signalled Friday it may not be ready to give up the fight. Analysts say other bidders may also enter the fray.

The battle for Andean's Cerro Negro project underscores the pressure miners face to find new reserves to maintain steady growth down the road. The competition, along with the record-setting price of gold around $1,250 (U.S.) per ounce, has left miners with little choice but to pay higher premiums for the projects they seek.

Andean started to gain attention from gold producers in June after both drill results and a feasibility study for its Cerro Negro project in southern Argentina showed it was higher grade and lower cost than originally forecast.

"This transformed the project and the smart guys saw that immediately," said Andean chief executive Wayne Hubert.

A number of proposals came in from "players in the Americas" said Mr. Hubert, without naming specific companies. He said none of those proposals were appealing until earlier this week, when Goldcorp and Eldorado presented each of their offers.

"Goldcorp put forward the most compelling proposal," said Mr. Hubert.

Goldcorp's bid, which has been approved by the Andean board, values the company at $6.50 per share compared with the Eldorado offer valued at $6.36.

Cerro Negro, scheduled to begin production in 2012, will help Goldcorp boost production as well as lower its overall cash costs down from the current $350 per ounce, the company said.

"It's a place where we can make a lot of money," Goldcorp chief executive Chuck Jeannes said Friday. It's the second time this year he has scooped an asset from a peer after snatching a controlling interest in the El Morro gold-copper project in Chile from Barrick Gold. Barrick, the world's largest miner, has launched a legal challenge to the deal.

"We don't get into these things to lose," said Mr. Jeannes.

Eldorado, meanwhile, showed no signs Friday of backing down from its offer. "We will keep our options open and you will see what we do when we do it," chief executive Paul Wright told analysts during a conference call.

Both companies are offering high prices for Andean, reflecting "the high grade nature of the deposit and the presence of at least two bidders for the company," said TD Newcrest analyst Greg Barnes in a note to clients.

Other potential suitors for Andean may include; Barrick, Anglogold Ashanti, Hochschild, Newmont Mining, Agnico-Eagle and Yamana Gold, according to Canaccord Genuity analyst Steven Butler.

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"We believe that the Cerro Negro project with its fast growing high-grade resource should be of interest to a number of other major gold producers," Mr. Butler said in a note.

Yamana Gold chief executive Peter Marrone said his company is not interested in bidding for Andean, but the value placed on Cerro Negro is encouraging for his own projects. "I now look at what we have … and my conclusion is, 'Wow, they have to be worth more than what the market is ascribing to them,'" Mr. Marrone said.

An Anglogold spokesperson said the company had "no interest" in a rival bid for Andean. Barrick declined to comment, while other companies could not be reached before press time.