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Gold producers are dusting off some old projects to take advantage of a steady rise in the metal's price.

War jitters and a faltering U.S. dollar have driven up gold in recent weeks. The spot price punched through $330 (U.S.) an ounce last week and traded yesterday at $337, a height last seen in 1997.

As investors ponder whether they should add gold coins, bars or company shares to their portfolios, gold producers are considering how to take advantage of the price rise.

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For some, that means restarting projects once shelved as too expensive or difficult to mine. Major producers such as Vancouver-based Placer Dome Inc., which began test-mining its mothballed Getchell mine in Nevada this fall; joint venture partners Kinross Gold Corp. and Bema Gold Corp., which are contemplating the restart of their Refugio Mine in northern Chile; and junior companies attempting to resurrect projects in Canada, Chile and elsewhere are part of a flurry of activity aimed at reassessing old prospects in the light of new and better prices.

Producers are "cycling back through all those projects that looked unattractive as gold prices went below $300 [an ounce] and looking at them again," said analyst Barry Allan of Research Capital Corp.

Assets getting a second look include once-operating mines that went into receivership in the 1990s, mines put on care-and-maintenance in the hope that gold prices would improve, and projects that never saw the light of day but that could now become attractive, he added.

Analysts say such reassessment is predictable when gold prices are on the rise. The spot price averaged below $300 between 1997 and 2001, but has risen by about 20 per cent this year and many analysts expect it to head higher in 2003, with some predicting it could surge past the $500 mark. Gold peaked at $850 an ounce in 1980.

Once-operating mines are especially appealing to mining companies -- and their backers -- because they can be brought back into production sooner and at less cost than even advanced-stage new projects, said William White, president of IBK Capital Corp., a Toronto firm that does financing work for mining companies.

"With the gold price starting to move back, people are looking for companies that were producing five or six years ago and that shut down due to the collapse in gold prices," Mr. White said. ". . . With a gold loan or a gold-indexed financing, for a relatively small amount of capital, these previous producers can be put back into operation."

A gold loan sees producers sell-forward gold at current prices for a set period to obtain financing they need to bring their mines back into production.

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IBK has done several such transactions in recent months, including a $3.75-million (U.S.) private placement for South American Gold and Copper Co. Ltd., a Toronto-based company that said it planned to use the proceeds to restart a gold mine in Chile. IBK was also the agent for a $3-million (Canadian) private placement for Toronto-based Caledonia Mining Corp., which said it would use the proceeds to reopen a South African mine mothballed since 1997.

Even with producers scrambling to get once marginal mines back into production, analysts say the activity is unlikely to lead to a glut that could drive prices down. Projects on care and maintenance could take months to get into full production and in some cases producers are increasing exploration or test-mining programs before committing to full-scale operations.

Placer Dome, for example, began test mining at Getchell this fall. If those programs are successful, the company said, it will likely ramp up to production of 300,000 to 350,000 ounces a year by the end of 2004.

Similarly, Bema and Kinross are reassessing the Refugio project in Chile, which has been on care and maintenance since June, 2001, but it could be months before operations kick back into gear.

And even with gold prices healthier than they have been in years, margins for producers remain slim, said Kerry Smith, an analyst with Haywood Securities Inc. in Toronto. Mr. Smith says some companies rushing to push projects back into operation are small, undercapitalized and could find themselves in the red if they move too quickly.

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