BUL­LION HUNT

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.

The Australian Mining Review - - FRONT PAGE - EL­IZ­A­BETH FABRI

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.”

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