Lack of big find keeps gold price up: Gold Fields

SYDNEY (Reuters) - A failure to find the next mother lode was helping prop up gold bullion prices, the head of South Africa's Gold Fields Ltd. GFIJ.J , the world's fourth-largest gold miner, said on Monday.

"There is a lack of exploration expenditure and a lack of discovery of any significant size," the company's chief executive, Ian Cockerill told a conference in the Australian city of Perth.

"The world is consuming 85 million ounces of gold a year but the industry is by no means finding and replacing that amount," he said.

Cockerill said the gold sector was firmly entrenched in a bull market and predicted there was still some way to go.

"Gold has in the past decade become the barometer of the geo-political state of the globe," he said.

"With the increasing hostilities over the last 10 years, we have seen sentiment come under gold from the prices of around US$200 an ounce in about November 2000 to the current range of US$600-700 an ounce," Cockerill said.

Spot gold <XAU=> sold for a record $850 in 1980 and traded as high as $730 an ounce in May 2006. The price has since recoiled though it remains well above long term averages. At 0353 GMT, an ounce of gold cost $662.25.

Cockerill said the "stupidity" of miners hedging future production had fallen by the wayside in favor of direct exposure to spot market prices.

"Most analysts now recognize hedging was a fault -- it is like eating your young -- we have come to recognize the craziness of selling something at a price delivery point in the future which is at a price that guarantees that you cannot replace it.

Gold Fields, which earlier this month posted third quarter gold production of 989,000 ounces, has long been critical of hedging gold.

Hedging has divided the world's mining companies, with rivals such as Newmont Mining Corp. (NEM.N: Quote, Profile, Research, Stock Buzz) and Rio Tinto Ltd./Plc. (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz) also refusing to hedge.

Start-up mining companies are sometimes forced by lenders to hedge at least part of their projected gold yield to cover loans.