Gold has failed to get the same sort of booster shot from the new Covid variant that it got in 2020 from the original Alpha strain.
In fact, it has only managed a small gain amid the selloff in equities, rise in the value of the US dollar (which makes gold’s rise look a bit stronger) and the rise in market volatility and uncertainty as we close out 2021 and head towards 2022.
Gold production in Australia may have dipped in the three months to September, but exploration for the precious metal continued unabated in the same period and remains a clear favourite with companies large and small.
Gold remains the most sought-after commodity in Australia as exploration spending continued to surge in the three months to September, rising a seasonally adjusted 4.5% to $926 million from the three months to June.
That was the highest quarterly figure since mid 2012 at the height of the last resources boom.
That not only reflected growing interest in gold and other metals such as nickel, copper and lithium, but higher spending in the iron ore sector as the impact of the initial wave of Covid lockdowns eased.
That saw total exploration in the year to September rise a massive 32% (from $701 million) despite the continuing pressures from Covid infections and lockdowns, with the major area of spending, Western Australia, shut off from the rest of the country and overseas.
Gold’s popularity was maintained despite sharp rises in spending on other base metals, such as copper and nickel, on iron ore (despite the huge price slide) a rise in spending on looking for oil and gas.
Spending on gold exploration in fact hit a new record in the three months to September of $429.7 million, steady on June quarter’s $$429.8 million but up more than 20% from $356.1 million in the September, 2020 quarter, according to the latest data from the Australian Bureau of Statistics on Monday for mineral exploration in the three months.
On original terms spending rose 7.7% to more than $982 million with $626.3 million spend by companies exploring around existing deposits and mines (up 5.8%) and more than 4346 million spent on new areas and deposits (up 11.5%).
It should be a clear message to investors that the major precious metal is going to be where the money is – that’s what more companies are spending looking for it, and finding or building out existing discoveries.
But the influence of the rising interest in non-gold minerals (such as copper, nickel, cobalt and lithium) was seen in the biggest rise in the quarter 37.8% in spending on the search for other metals to just over $91 million.
Spending on iron ore exploration jumped nearly 16% to $174.6 million in the September quarter from the June quarter, but the latest figure was $64.6 million spent a year earlier.
Meanwhile spending on oil and gas exploration rose 13% to nearly $285 million in the latest quarter from the three months to June.
That was up sharply from the 4216 million spent in the September, 2020 quarter when energy companies were still hunkered down, slashing spending on exploration and development because of the massive falls in demand, production and prices were still rattling around markets.
Meanwhile, lower production from Newcrest’s Cadia in NSW, Newmont’s Boddington mine in WA and its Tanami mine in the NT and Kirland Gold’s Fosterville mine in Victoria Australian gold mine production drove a dip in Australian gold production in the three months to September.
The latest estimates on Australian gold output from Melbourne’s Surbiton Associates showed Australia produced 77 tonnes of gold in the September quarter, six tonnes and 8% lower than the June quarter of 2021.
Australia’s latest figure was down from the 81 tonnes produced in the September, 2020 quarter as well (which was down 4 tonnes from the June, 2020 quarter).
Surbiton said that fall saw China move back in front of Australia as the world’s leading gold producer.
Australian production fell to 177 tonnes in the June half year, according to data in the latest resource quarter from the Australian government. That was a fall of 4.15 and was due to skill and labour shortages, planned and unplanned maintenance, and lower ore grades in some mines (and the continuing impact of Covid lockdowns and border closures in WA)
“With gold production figures now available for the first nine months of 2021, it appears that China has taken the lead again as the world’s top gold-producing country,” Surbiton Associates director Dr Sandra Close said.
“Australia briefly became top producer for the first time, based on gold production figures for the first half of 2021.
“It is a close-run thing as to which country will be the world’s top gold producer for the whole of 2021.
“China has been number one since 2007, but Australia is now challenging for that spot.”
Australian gold production for the first nine months of 2021 was just under three tonnes less than China’s production for the same period, according to figures released by the China Gold Association, with China producing 236.75 tonnes compared to Australia’s 234 tonnes.
“Much will depend on gold output reported for the final quarter of the year,” Close said.
“For some 30 years we have been compiling the most detailed gold survey for Australia and know that the December quarter is usually the strongest period of the year locally, but we do not know what the relative performance will be for both countries.”
Newcrest Mining’s Cadia operation in New South Wales saw a drop in production of almost 2.7 tonnes of gold, due to having to replace and upgrade the SAG mill motor.
Newmont Corporation’s Boddington mine in Western Australia produced almost one tonne less due to severe weather, shovel reliability and operational delays associated with the introduction of the new autonomous haulage system for its Caterpillar haul trucks.
The company’s mine in the Tanami desert was hit by a Covid related infection and closure at the end of the June quarter with the impact continuing into the early weeks of the September quarter as well.
Kirkland Lake Gold’s Fosterville mine in Victoria also declined by around 0.7 tonnes, mainly due to lower ore grades.
However, ore grades are still running at more than three-quarters of an ounce to the tonne, the highest-grade gold ore in Australia.
Capricorn Resources’ new Karlawinda operation saw an increase of 22,000 ounces in the September quarter, as it ramps up production to a rate of more than 100,000 ounces per year.
“The outlook is positive, with several projects currently under construction, and a healthy number of scoping and feasibility studies underway,” Close said.
There’s also been plenty of stock-specific news from the sector.
Northern Star Resources is making a second foray into the huge North American gold and copper sector after announcing plans to execute a joint venture (JV) with Canada’s Osisko Mining.
The company already controls the Pogo underground gold mine in Alaska for which it paid $260 million in 2018.
By going into Canada this time, it joins a growing list of Australian miners investing in either Canada or the US in copper, gold, or a bit of nickel.
They include rivals such as Evolution Mining (Red Lake), Newcrest (Red Chris and gold miner, Pretium), St Barbara (Atlantic Gold in May, 2019), while BHP is trying to take control of Noront resources, an explorer looking for nickel and copper in northern Ontario. Andrew Forrests’s Wyloo Metals is a rival for control of Noront.
Rio Tinto controls the huge Kennecott copper, gold and silver mine in Utah and Rio and BHP have spent more than $US2 billion trying to start the huge Resolution prospect in Arizona.
All up these investments have cost well over $US12 billion over the past few years and represent a major change in confidence among mid ranking and the biggest miners in base metals.
Northern Star said on Wednesday that it had signed an agreement with Osisko for the raising of $C154 million ($A169 million) through a four-year convertible senior unsecured debenture, which will fall due on December 1, 2025.
The aim of this funding deal is to get a foothold on up to 50% of Osisko’s Windfall gold project in Quebec.
Windfall is a high-grade gold discovery that Osisko is brining into production in about two years’ time. In February of this year the company said Windfall had a mineral resource of more than 22 million tonnes of gold ore on a measured, indicated and inferred basis.
Ososko said that, “assuming a cut-off grade of 3.50 g/t Au, comprises 521,000 tonnes at 11.3 g/t Au (189,000 ounces) in the measured mineral resource category, 5,502,000 tonnes at 9.4 g/t Au (1,668,000 ounces) in the indicated mineral resource category and 16,401,000 tonnes at 8.0 g/t Au (4,244,000 ounces) in the inferred mineral resource category.”
That’s a total of 6.1 million ounces of gold and since February the company has revealed a number of large gold intercepts in several new drilling campaigns.
The loan carries an expensive interest rate of 4.75% a year payable semi-annually and can be converted by Northern Star into a JV interest any time after December 1, next year at a conversion price of $C4 per Osisko share, subject to certain conditions. There is also a 125% conversion premium on Northern Star’s JV play. Osisko can redeem the debenture any time after the second anniversary of closing (December 1, 2023) for cash or common shares, subject to certain conditions.
Windfall is considered a high-grade underground gold deposit which Osisko has brought to a well-advanced state of development. In April, Osisko announced that it expected Windfall to start production in 2024.
Northern Star managing director Stuart Tonkin said the JV was a good fit for the company.
“Partnering with Osisko provides a de-risked entry to a high-quality gold province on an advanced development project and aligns with our strategy,” he said.
“A prospective 50/50 JV leverages the skills from both teams to deliver strong returns for our respective shareholders.
“The Osisko team are a complementary partner to Northern Star with a proven track record of discovery and development and a strong commitment to ESG principles.”
Osisko chairman and chief executive officer John Burzynski said Northern Star’s reputation and expertise would assist the Windfall project greatly.
“The potential of joining forces with Northern Star, a well-respected gold producer with a depth of experience in mining underground high-grade deposits similar to the Windfall project, would help de-risk the remaining work ahead to bring the Windfall project to successful production,” he said.
Meanwhile Newmont Mining this week sold off $US1.3 billion in unwanted royalty and other assets to Franco Nevada, for a net profit of just under $US1 billion which will offset the negative impact from the 500,000-ounce cut in its forecast gold production for the year to the end of December.
And amid all the publicity of that deal, Newmont moved in Australia to expand its involvement in the hunt for gold in the Tanami desert region of the Northern territory where it already operates one of the country’s biggest gold mines.
Through its wholly-owned subsidiary Newmont Exploration has undertaken to spend $6 million or establish a JORC 2012 inferred mineral resource (whichever comes first) at Monza to earn an initial 51% stake in the project.
Monza covers more than 3000 square kilometres of exploration licences and applications in the Tanami region of the Territory, where Newmont’s Tanami gold mine is located.
The exploration area is situated along the Trans-Tanami Fault trend which is home to major gold deposits such as Newmont’s 14.2-million-ounce Callie gold mine.
Ten of Monza’s 18 tenements have had no drilling in the last 20 years, with only soil sampling and reconnaissance drilling the primary exploration activities in the past.
If Newmont elevates Monza to a mining operation, the company will earn an additional 29% stake, culminating in an 80% total interest in the project.
In the case that Monza has reached mining status, owners, Prodigy Gold can elect to increase Newmont’s interest in the joint venture (JV) to 85% if Newmont commits to funding Prodigy Gold’s share of future JV costs between the date of notice until first commercial production.
Prodigy Gold managing director Matt Briggs said the Monza JV solidified his company’s rapport with Newmont.
“Prodigy Gold has established a good working relationship with Newmont through a current joint venture over the Tobruk gold project (in NT), so we are looking forward to combining our technical expertise to advance Monza,” he said in a statement this week.
Newmont is spending heavily on its Tanami Expansion 2 project, adding a 1,460 metre hoisting shaft to allow mining to 2,140 metre below surface, and supporting infrastructure to achieve an annual production of 3.5 million tonnes from 2.4 million tonnes a year currently.
An added factor in this deal is that Newmont has considerable experience in the Tanami – the maps Prodigy Gold and Newmont provided with the announcement show extensive holdings in and around the exploration area as well as around the Granites mine.
As with gold exploration generally it always pays to follow what those ‘in the know’ are doing, especially when the one being followed knows so much about the rocks under the surface.
Aeris Resources is about to add a Budgerygar deposit to its 100% owned Tritton copper and gold mine and exploration area in Central Western NSW.
Tritton is northwest of the well-established Cobar copper mine that Glencore is still trying to sell. The area is high prospective for copper and gold.
In a statement to the ASX this week Aeris said that it had seen an increase in tonnage and the amount of contained copper at Budgerygar to the point where a mine can be easily established using the existing underground operation 600 metres away to the south.
Aeris said the updated Mineral Resource estimate of 2.6 million tonnes at 1.48% copper, for 38,700 tonnes of copper metal is a 15% increase in both tonnage and copper metal compared to the previously reported Mineral Resource estimate in June of this year.
It is “based on an underground resource definition drill campaign targeting the conversion of Inferred Mineral Resource to an Indicated Mineral Resource status. The underground resource definition drill program has to date targeted the upper third of the known Budgerygar deposit. The resource definition drill program is ongoing and is now targeting the deeper extents of the Inferred Mineral Resource, “ the company said.
Aeris’ Executive Chairman, Andre Labuschagne, said in the statement that “The Budgerygar deposit is one of three life-of-mine extension projects, along with Avoca Tank underground mine and Murrawombie Pit cut-back, that we are developing at the Tritton Copper Operations in FY22.”
“With the Budgerygar deposit being only 600m from the Tritton underground mine infrastructure and commencing from 70m below surface, the cost and time to bring into production are significantly lower compared to a new stand-alone mine.”
“The drilling program to date has focused on the upper third of the known deposit, enabling a large portion of this section of the deposit to be upgraded to the Indicated Mineral Resource category. Interestingly, the copper and gold grades for the Indicated Resource are higher than those reported in the Inferred category. This uplift in grade as drill density increases is similar to what we saw in the upper sections of the Tritton deposit.”
“Our immediate focus is to continue the resource drilling program over the remainder of the Inferred Mineral Resource. However, the deposit remains open at depth and in FY23 we intend to drill a couple of deeper holes to get a better understanding of potential continuity of the deposit at depth.”
The company aims to start first development ore next March and the first ore from stopping in the following quarter.
And finally, in moves that will give the few remaining gold bugs some heart, the central banks of Singapore and Ireland have quietly added gold to their reserves in 2021.
Singapore’s move was the larger – around 26.3 tonnes – which would be a 20% lift in the size of the metal holdings in the accounts of the MAS – the Monetary Authority of Singapore.
That was the first increase in gold for several decades, while Ireland added two tonnes this year in the first purchase since 2009.
Singapore’s purchases appeared in the data from MAS on its International Reserves and Foreign Currency Liquidity reports.
That in turn was picked up in the International Monetary Fund’s monthly update, which shows it was the first increase in figures dating back to 2000.
The purchases will be noted in the December quarter and 2021 gold demand, sales and production reports from the World Gold Council (WGC) due out in late January and February.
The September quarterly report from the WGC showed that central banks continued to buy gold in the period with global reserves up by 69 tonnes in the latest quarter and by almost 400 tonnes year-to-date.
The Reserve Bank of India (RBI) was the largest buyer in the latest quarter. Gold reserves grew by 41 tonnes to 745 tonnes, a small step up in the pace of buying by the RBI, and 2021 looks set to see the biggest annual increase in India’s official gold reserves since 2009, according to the WGC’s projections.
The Central Bank of Brazil added a further 9 tonnes in Q3, having been one of the largest buyers in the first half. Gold reserves now stand at 130 tonnes, up 92% year to date.
Uzbekistan (26 tonnes), Kazakhstan (7 tonnes), and Russia (6 tonnes) were the other major buyers in the quarter.
“It should be noted that we believe that Russia’s purchases were a likely rebalancing of its gold reserves following a few months of coinage-related sales earlier in the year, the WGC said.
The Philippines and Mongolia also increased their gold reserves in Q3, both by just under a tonne.
Poland’s gold reserves were unchanged on a net basis over the quarter. In early October, however, central bank Governor Adam Glapinski indicated that it has initial plans to boost purchases by a further 100 tonnes in 2022.
Singapore and Ireland were not mentioned so there will be a significant boost to central bank activity in the next update.