The gold price may have slumped; but this hasn’t dampened the spirits of Australian gold producers with the big players posting record profits and a new cohort of conglomerate-focused explorers making moves in the Pilbara.
As domestic gold production looks set to plummet to generational lows in the coming years, a number of explorers are making headway at a cluster of promising, early-stage conglomerate gold projects in the Pilbara.
IN January gold prices were hovering at a peak of $US1362 per ounce on the back of a turbulent year for US politics and weakening US dollar.
Australian gold producers, which benefit strongly from the AU/US exchange rate, were widely optimistic for the year ahead.
But over the last eight months, gold prices have taken a dive, plummeting to lows of $US1176/oz mid-August, in line with a rising US dollar and inflation-adjusted interest rates.
Australia’s biggest gold players weren’t complaining though; Saracen, Western Areas, Evolution Mining, and St Barbara all ended FY18 with record profits after a solid year of production.
At the August Diggers and Dealers conference in Kalgoorlie, Kirkland Lake also took up top honours, winning the coveted Digger of the Year award, for its recent achievements, including a 70 per cent increase in production at its Fosterville mine in Victoria, and increasing reserves by 210 per cent to 1.03 million ounces.
Perth Mint – often a barometer of the sector’s strength – was in positive territory too, launching Perth Mint Physical Gold ETF ( AAAU) on the New York Stock Exchange (NYSE) on 15 August.
AAAU, the first exchange traded fund (ETF) on the NYSE, will provide a direct pathway for Australian-mined gold to be sold into the world’s largest financial market.
Perth Mint chief executive Richard Hayes said “Australian gold has an international reputation for purity and ethical sourcing, with investors integrally participating in the success of a great Australian story”.
“In an increasingly uncertain and turbulent world, the case for gold remains compelling because it serves as a potential hedge against inflation, currency risk and stock market volatility,” Mr Hayes said.
However, recent analysis by S&P Global Market Intelligence forecasts Australian gold output to slump to a “generational low” in the mid-term.
S&P Global Market Intelligence analyst Chris Galbraith said while global gold production was expected to rise to new highs in 2019-2020, Australia’s outlook wasn’t as rosy.
“In the case of Australia, despite production being on track to hit a 26-year high of 10.2moz in 2019, we estimate that Australian gold production will start to decline thereafter,” Mr Galbraith said.
“We are forecasting a 9 per cent fall year over year in 2020, and we expect country’s production to reach a generational low of 6.8moz by 2022, a 33 per cent drop within only three years.”
Mr Galbraith said the forecast decline in Australian production after 2019, could be attributed to the short mine lives of recent start-ups and some significant mines approaching the end of their lives.
In June, Northern Star Resources chief executive Stuart Tonkin told delegates at the WA Mining Club the view of the gold industry’s future was seen through “rose-coloured glasses”, and the sector needed to future proof itself through investment in exploration.
“Every dollar invested in exploration generates $11.40 in revenues that come back into the sector,” Mr Tonkin said at the time.
Mr Tonkin also raised concerns on the 13-year average timeframe between discovery and development, and the fact that the average life of Australian gold mines was five years, with a third of those having only a 2.5 year reserve life.
But there were always exceptions. Take Gold Fields and Gold Road’s Gruyere JV; the mine is scheduled to produce 270,000 ounce per annum (ozpa) over a 13-year mine life, and once in production, would have a five and a half year gap between discovery and first gold.
At Diggers and Dealers last month, Gold Road’s outgoing chief executive and managing director Ian Murray said construction was on track at Gruyere, with first gold expected in the June quarter of next year.
Pilbara: The Next Wave
A group of Pilbara-focused explorers were also making headlines.
In 2017, a gold rush began when Artemis Resources and its Canadian JV partner Novo Resources discovered near-surface conglomerate-hosted gold nuggets at Purdy’s Reward.
Conglomerate gold is a gold-bearing rock which contains rounded grey quartz pebbles and other minerals.
The flattened watermelon-seed sized nuggets found at Purdy’s were a new-style of gold mineralisation in the West Pilbara, likened to the Witwatersand province of South Africa, which has significant Archean sedimentary conglomerates, and has produced more than two billion ounces of gold (or a third of all gold ever mined).
Within months of the news, more than two dozen resources companies flocked to the Pilbara in pursuit of the next big gold discovery.
Juniors currently exploring the region included Canadian-listed Pacton Gold; De Grey Mining which received a $5 million investment from DGO Gold in July to advance exploration; Novo Resources; Kairos Minerals; Kalamazoo Resources; Arrow Minerals; Castle Minerals; Impact Minerals; Accelerate Resources; Marrindi Metals; and Calidus Resources which owns the Warrawoona project.
On 17 August, Artemis announced Novo Resources (the project manager for Purdy’s) had recommenced exploration on site, with drilling to determine the depth and thickness of targeted conglomerate units.
Artemis and Novo said the JV aimed to have sufficient data for a mineralisation report by the end of 2018.
At Diggers and Dealers, Novo Resources president Dr Quinton Hennigh told reporters there seemed to be more scepticism surrounding the Pilbara conglomerate story than among the investment community in Canada, but many analysts and geologists had visited its Pilbara sites and were convinced.
Mr Hennigh added mining conglomerate ore was no easy feat.
“It is quite challenging, this is very hard rock but we are working through this,” Mr Hennigh said.
“A lot of people think you can just take a D9 out and start mining this thing, that’s not quite the way it works but we are moving this forward in the most expeditious and cost-efficient manner.”