BACK	ENVIRONMENT: Gold Price Plunge Brings Mixed Benefits

This week the price of gold slid below 300 dollars a troy ounce (9.65 a gramme), the lowest level in 12 years, from the more than 400 dollars an ounce that ruled the previous price of the yellow metal.

As a result companies like Pegasus and Oro Nevada of Canada have seen their share prices take an even steeper dive. Pegasus saw shares trading at one dollar from a twelve-month high of 11 dollars while Oro Nevada saw its share price drop from four Canadian dollars to 34 Canadian cents over the same period.

Last week Pegasus Gold of Canada announced that it will close its Mount Todd mine in Australia's Northern Territories and sit down with its bankers to discuss a bail out. Oro Nevada has already shut down its exploration operations in Crescent Valley, Nevada, in the United States and is looking for a buyer.

They are not the only ones. In September Barrick, North America's biggest gold mining company, said that it would close its El Indio and Tambo mines in Chile and the Bullfrog, Mercur and Pinson mines in the United States. Macraes, New Zealand's biggest gold miner, has also decided to put its expansion plans for its Macraes, Otago, mine on hold as a result of the weak gold prices.

Most environmentalists are delighted with this news because most gold mines use toxic cyanide that often leaks into local water supplies. Additionally trace quantities of dangerous heavy metals like arsenic, lead and mercury are often dumped into local waters with waste rock from the mine.

Pegasus, for example, has long been a target of protests in the state of Montana in this country where it operates four mines because of its poor environmental record.

''This company has been a demonic, evil influence in the Montana Legislature and with the governor for a number of years and it will be good riddance to them, in my view,'' says Jim Jensen, the executive director of the Montana Environmental Information Centre.

Environmental and indigenous groups have fought a bitter battle against Pegasus for the water pollution caused by cyanide and heavy metal leaks from the Zortman-Landusky mine in the Little Rocky Mountains. The dispute was settled last year when the company agreed to undertake a 32 million dollar clean-up.

Unfortunately the financial woes of the company means that it may not be able to complete the clean-up unless the state steps into pick up the financial costs.

Likewise the close-down of the Mount Todd mine in Australia will bring hardship to indigenous communities like the Barnjarn group of the Aboriginal Jawoyn Association who struck a ground- breaking deal for compensation with the company in October 1996.

More mines are expected to close in the next few months. Here in the United States the cost of producing an ounce of gold is about 300 dollars, but the average production costs in Australia and South Africa are 358 dollars and 334 dollars an ounce respectively, according to Gold Fields Minerals Service (GFMS).

At the Golden Sunlight mine near Whitehall, Montana, mine manager Jerry Harrington says: ''We look forward to the price recovering (but) if it stays low for six months, we might have to figure out how long we could keep infusing cash into the operation.''

Big companies will not want to close mines soon. ''Prices have to stay at this level for quite some time before big closures will even be contemplated. It's just too expensive to close a mine,'' said Hester le Roux, a GFMS gold supply analyst.

Some of the biggest mines in the world will be able to shake- off the price collapse because gold is not their main product. For example the Freeport McMoRan Copper & Gold Grasberg mine in Irian Jaya, Indonesia, produces 900,000 tons of copper. This covers the company's operating costs while the 85.5 tons of gold produced a year is simply an added bonus.

Other major mines like the Yanacocha mine in the northern Andes of Peru that is operated by Newmont of Colorado will remain profitable because production costs average as little as 107 dollars an ounce, partly because the company bought gold-bearing land from local people at prices as low as 42 dollars a hectare.

But the future looks bleak for smaller producers who have very little cash reserves and do not produce a diverse range of products. Instead they rely on investors to supply them with cash based on the traditional high price of gold because both bankers and consumers buy gold even in times of economic hardship.

Unfortunately for these small producers this week there was more bad news. Eddie George, the governor of the Bank of England, announced on Wednesday that the European Union's central bank being formed next year is unlikely to hold large inventories of gold in its reserves.

Already central banks in Australia, Belgium and the Netherlands have sold large parts of their reserves. Another large holder, Switzerland, has indicated it is likely to sell a large part of its reserves while Canada has been steadily reducing its supplies.

The Asian currency crisis, meanwhile, also sharply reduced demand for gold in jewelry from what had been one of the fastest-growing regions of the world while Asian investors have sold their holdings to pay for stock losses. (ENDS/IPS/pc/mk/97)