Gold miners continue to cut costs, up production and finally – raise more money

After a short rally at the start of 2018 year peaking at $1,354/ozt on March 25, the gold price fell steadily during Q2 and Q3 to USD 1,176/ozt on August 16, and then rebounded to $1,280/ozt on December 28. We analysed the effect of the gold price on the gold mining industry using data from the Mining Intelligence Data Application. The data we used represents companies reporting quarterly production and listed on the following stock exchanges: TSX (+TSX-V), ASX, LSE (+LSE-AIM), NYSE, and JSE.

Major gold producers’ global aggregated quarterly operating income followed the gold price and shrank by 44% during the year, from  $2,500 million in Q1 to $1,400 million in Q3 and remained steady in Q4 2018 (Figure 1).While aggregated operating income is often considered a reliable indicator to measure operating efficiency and performance, we dug deeper in our Q4 2018 review of the gold mining industry. We looked at three further metrics: quarterly gold production, all-in sustaining costs, and capital raisings. The data indicates the following:

Figure 1. The average gold price charted against gold companies’ aggregated operating income.

Reported global gold production for Q4 2018 was 16.8 Mozt, or up about 2% compared to Q3 2018.

Quarterly gold production reported by publicly-traded companies accounts for about 65-70% of total global gold production and can be considered an indicator of the overall state of the global gold mining industry.

Reported global average quarterly all-in sustaining costs were 3% lower than in Q3 2018. Overall, gold producers reacted relatively quickly to the deteriorating gold market conditions and managed to reduce their costs by making efforts to catch up with shrinking margins.

Capital raisings completed by gold producers, developers, and explorers rose by 17% from Q3 to Q4 indicating investors started gaining confidence again.

Reported global gold production: 

For the Q4 ending December 31, 2018, global reported gold production totalled 16.8 Mozt. North America was the largest gold producer (4.3 Mozt), followed by Africa (3.5 Mozt), and Australia & Oceania (3.0 Mozt).

The three regions that drove the 2% quarter on quarter increase in global gold production were North America (+266 kozt, or up 7%), South America (+215 kozt, or up 10%), and Australia & Oceania (+148 kozt, or up 5% from Q3 2018). Production in Asia took a nosedive — dropping 32% due to significant decrease in gold output recorded at Indonesia’s Grasberg mine.

Figure 2. Global quarterly gold production on regional level, Q2 2018 vs. previous quarters, kozt.

Annual reported gold production for 2018 was 64 Mozt, or up about 3% compared to 2017.

With 620 kozt of gold mined in Q4 2018, Barrick’s Goldstrike production center in Nevada, USA, was the world’s lead gold operation, well ahead of its competitors (Table 1).

Indonesia’s unique Grasberg gold-copper mine — control of which was transferred from Freeport McMoran to the local government — lost its first place in global production ranking in Q4 (391 kozt) because of a drastic drop in gold output due to the transition from open-pit to underground mining. Despite this, Grasberg took over the position of being the world’s biggest gold producer from Muruntau mine in Uzbekistan (state-owned, thus not shown in this review due to lack of reported quarterly production numbers) by the end of 2018. Annual gold production at Grasberg jumped to a record 2.7 Mozt level in 2018, or up 73% compared to 2017.

Third and fourth in this ranking are Polyus Gold’s gigantic Olimpiada mine in Russia (345 kozt) and Barrick’s Pueblo Viejo mine in Dominican Republic (277 kozt).

Seven out of the top 10 biggest gold mines reported growth in Q4 2018 gold output while three faced declining production rates. The biggest gains in gold production were achieved at Kumtor (up 86%), Lihir (up 38%), and Geita (up 22%) mines.

Reported global average quarterly all-in sustaining costs

Global average all-in sustaining costs (AISC) fell 6% during the course of 2018, or from  $1,050/ozt in Q1 to $988/ozt in Q4 2018 (Figure 3). This indicates that companies overall continued to react quickly when the gold price declined. In Q4 2018, nine out of the top 10 lowest cost mines further decreased their AISC compared to Q3 2018 (Table 2).

Mining Intelligence focused on primary gold operations’ AISC, i.e. mines where gold contributed to 80% and more of revenues from operating activities generated during the quarter. The ranking excludes tailings re-processing operations, mines where the precious metal is produced as a by-product, and operations where companies report gold-equivalent output.

 

Figure 3. Global average all-in sustaining costs (AISC) vs. average gold price, ozt.

With $332/ozt, Kirkland Lake’s Fosterville mine in Australia was the lowest cost gold operation in Q4 2018 measured by AISC. In Q4, Fosterville mine’s ore grade was impressive at 39.7 grams of gold per tonne of milled ore, making this the world’s highest-grade major gold mine.

This was followed by Polyus’s unique Olimpiada mine (USD 389/ozt) in Russia, Nord Gold’s Neryungri mine ($441/ozt) in Russia, and Centerra Gold’s Kumtor mine ($508/ozt) in Kyrgyzstan.

Completed capital raisings

The strength of equity markets is a barometer of investor confidence. The amount of capital raised through equity placement directly reflects the sentiment in the mining industry. This indicator clearly shows that in Q4 2018, investors began to regain some confidence in the gold mining industry, with gold producers, developers, and explorers at major exchanges raising 17% more capital compared to Q3 2018 (Figure 4).

The average gold price charted against gold companies’ completed capital raisings.

 

Summary

In Q4 2018, reported gold production continued to increase and global average all-in sustaining costs continued to go down. This is a very positive indication that overall, gold miners are continuing to watch their costs closely while producing more gold. After two very challenging quarters, steady Q4 operating income is likely a result of the improving market conditions. Investors’ confidence in the gold mining industry, while at a low in Q3, has followed the upward trend of the gold price in Q4.

The underlying data for this article is from the Mining Intelligence Data Application.

 

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30-year study shows dramatic drop in infant mortality near sub-Sahara gold mines

Large scale gold mining in sub-Saharan Africa has reduced infant mortality in nearby communities, with rates falling by 50% among those born within 10km of a gold mine, conclusion new research by Anja Benshaul-Tolonen published in the May 2019 issue of The Economic Journal.

Benshaul-Tolonen’s research finds that local industrial development may be an effective way to reduce infant mortality in developing countries with high mortality rates from poverty.

Drawing on data on women’s fertility records from demographic and health survey and large-scale gold mining data from eight countries over 30 years, the study shows that the average mortality rate in the communities before the mines open is 151 deaths per 1000 births.

This rate drops during the investment of large-scale gold mining and continues to fall following the mine opening. The author finds that the rate drops by around 79 deaths per 1000 births. This is the equivalent of the total gains in infant survival achieved in Sub-Saharan Africa since the 1970s to today.

Many children die of poverty and its consequences with malnutrition and lack of basic health care among the main culprits, the research finds.

According to the author, the significant fall in infant mortality found in this study may come from increases in economic growth and that women living close to mines are 27% more likely to work in the service sector. Other possible explanations include increased health knowledge and access to remedies.

Access the full report here.

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Cache Exploration buys gold project in Mali

Cache Exploration (TSX-V:CAY) announced the acquisition of a 100% mineral interest in a gold project in Mali, West Africa.

In a press release, Cache said that it signed a definitive agreement with private vendor Rachid Mogabgab and that the acquisition includes an estimated $250,000 in mining equipment previously utilized at the project.

To go ahead with the deal, the Vancouver-based firm has to issue 2,500,000 common shares on the closing date and pay the vendor a total of $210,000.

The property is located in southwestern Mali and, according to Cache, is underlain by Birimian volcano-sedimentary rocks and granitic intrusives.

“The first work in the area started in 1989 with the Or Bagoe project, consisting of geochemical prospecting on a 1,000m x 250 m grid. In 1998, the Technical Assistance to the Mineral Sector Project re-analyzed the samples obtained during the Or Bagoe project. Anomalous results were obtained for the Kokoyon property with the highest being 9.9 g/t Au,” the miner’s media statement reads.

Once approvals are received, Cache said its geologists plan to explore the high-grade gold samples on the property. "Geophysical, geological and soil sampling surveys followed by drilling are suggested to resume exploration on the property," the press brief states.

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RANKED: Top 10 lowest cost gold mines on the globe

In 2018, global gold mining companies' average all-in sustaining costs (AISC) fell 6% across the board as miners reacted to a gold price in steady decline for most of the year.

The AISC metric serve as a benchmark of a mine’s operating efficiency. They provide a more comprehensive look at mine economics than the traditional "cash costs" approach that many companies may interpret arbitrarily – and it includes important expenses such as overhead outlays and capital used in ongoing exploration, mine development and production.

Mining Intelligence, a MINING.com sister company, looked at costs at primary gold mines and ranked them based on AISC. Primary gold operations are defined by Mining Intelligence as “mines where gold contributed to 80% or more of revenues from operating activities generated last year.”

The data used by Mining Intelligence represents companies reporting quarterly production and listed on the following stock exchanges: TSX (+TSX-V), ASX, LSE (+LSE-AIM), NYSE, and JSE. The ranking excludes privately-owned mines, tailings, re-processing operations, mines where the precious metal is produced as a by-product, and operations where companies report gold-equivalent output.


Falling out of the top ten list compiled by Mining Intelligence in 2018 are two Barrick mines that were on the Mining Intelligence list compiled in 2018: Lagunas Norte in Peru, where costs have gone up from $483 to $636/oz, and Pueblo Viejo, in the Dominican Republic, where costs rose from $525 to $623/oz. The Barrick mines made way for two recently commissioned mines: B2Gold's Fekola mine in Mali, and Atlantic Gold's Moose River mine in Nova Scotia.

1 Svetloye – $425/oz

Svetloye mine. Image from Polymetals.

Polymetal’s Svetloye mine is an open-pit gold operation that located in the far east region of Russia. Despite the remote location and lack of infrastructure, high-grade ores and heap-leaching technology help this mine to produce gold at the lowest costs possible.

2 Fosterville – $442/oz

Fosterville mine. Image from Kirkland Gold.

Fosterville is the largest gold producer in the state of Victoria, Australia. The underground mine is owned by Toronto-based Kirkland Lake Gold. Production in 2018 totalled 356,230 ounces. Recently the company raised the production guidance to 550,000-610,000 ounces for 2019-2020, up from the previous guidance of 390,000–430,000 ounces.

3 Olimpiada – $468/oz

Olimpiada mine. Image from Polyus.

Located in one of Russia’s most prolific gold mining provinces, Olimpiada is Polyus’ largest operation.To treat Olimpiada’s sulphide ores, Polyus employs BIONORD, the company’s proprietary bio-oxidation technology. Successful exploration activities in the area indicate the potential for substantial extension of the life of this mine.

4 Voro – $477/oz

Voro mine. Image from Polymetal.

Voro is one of Polymetal's very first key gold assets, acquired in 1998. The mine and processing facility is located in the Sverdlovsk region of Russia. The open-pit and heap leach operation started in 2000 and has another nine years of life.

5 South Arturo – $478/oz

South Arturo mine. Image from Premier Gold Mines.

The South Arturo open-pit gold mine in Nevada is a high-grade oxide deposit amenable for highly efficient heap leaching mineral processing and extraction technology. This deposit is of the prominent Carlin-type widely known as being one of the most productive and cost efficient geological formations worldwide. Premier Gold Mines holds a 40% interest in the South Arturo property with Barrick owning the remaining 60%. Barrick processes South Arturo ore at its Goldstrike plant 5 km south of the mine.

6 Long Canyon – $505/oz

Long Canyon mine. Image from Newmont.

Newmont’s Long Canyon open-pit mine is of the same mineralization style as the South Arturo deposit, and the only significant discovery made in Nevada in the last decade. The nature of the deposit, application of a heap leach technology and tapping into existing infrastructure keep costs at Long Canyon at some of the lowest levels in the industry.

7 Fekola – $533/oz

Fekola mine. Image from B2Gold.

B2Gold first acquired the world-class Fekola gold project in Mali through a merger with Papillon Resources back in 2014. First gold pour at the Fekola mine took place three years later. The company recently decided, based on a positive PEA study, to invest $50 million into expanding the mine's capacity.

8 Cerro Negro – $535/oz

Goldcorp’s Cerro Negro mine.

Sitting 600 metres above sea level on the Patagonian plains in southern Argentina, Goldcorp’s Cerro Negro underground mine has 4.86 million ounces in proven and probable gold reserves. Commercial production began on January 1, 2015.

9 Blagodatnoye – $547/oz

Blagodatnoye mine. Image from Polyus.

Polyus commissioned Blagodatnoye in Krasnoyarsk, eastern Siberia in July 2010. Processing capacity at the open pit, located 25 km from the Moscow-based company's flagship Olimpiada mine, is 8.1 million tonnes of ore per year, which makes it one of the largest facilities of its kind in Russia.

10 Moose River – $564/oz

Atlantic Gold's Moose River mine.

Atlantic Gold’s Moose River open-pit mine is located in Nova Scotia that has a long history of gold mining. Commercial production was declared in March 2018, and in the first year production reached 90,500 ounces. Atlantic expects its phase two expansion plans will have gold production ramping up to more than 200,000 ounces per annum.

(Based on research compiled by Vladimir Basov of Mining Intelligence)

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World Bank, Germany, Rio and Anglo set up “climate smart” mining fund

The World Bank launched the Climate-Smart Mining Facility on Friday, the first-ever fund dedicated to making mining for minerals climate-smart and sustainable.

The fund will support the sustainable extraction and processing of minerals and metals used in clean energy technologies, such as wind, solar power, and batteries for energy storage and electric vehicles.

The World Bank is targeting a total investment of $50 million, to be deployed over a 5-year timeframe. The fund will focus on activities around four core themes: climate change mitigation; climate change adaptation; reducing material impacts and creating market opportunities, contributing to the decarbonization and reduction of material impacts along the supply chain of critical minerals needed for clean energy technologies.

The facility evolves out of a World Bank report “The Growing Role of Minerals and Metals for a Low-Carbon Future” which found that a low-carbon future will be significantly more mineral intensive than a ‘business as usual’ scenario. Global demand for strategic minerals like lithium, graphite and nickel will skyrocket by 965%, 383% and 108% respectively by 2050, according to the World Bank’s updated 2018 projections

Global demand for strategic minerals like lithium, graphite and nickel will skyrocket by 965%, 383% and 108% respectively by 2050, according to the World Bank’s updated 2018 projections, which are based on the assumption that countries will implement the Paris Agreement.

The multi-donor trust fund will work with developing countries and emerging economies to implement sustainable and responsible strategies and practices across the mineral value chain.

Partners include the German government and private sector companies, Rio Tinto and Anglo American. The Facility will also assist governments to build a robust policy, regulatory and legal framework that promotes climate-smart mining and creates an enabling environment for private capital.

Projects may include supporting the integration of renewable energy into mining operations, given that the mining sector accounts for up to 11%of global energy use and that mining operations in remote areas often rely on diesel or coal; supporting the strategic use of geological data for a better understanding of “strategic mineral” endowments; forest-smart mining; preventing deforestation and supporting sustainable land-use practices; repurposing mine sites and recycling of minerals and supporting developing countries to take a circular economy approach and reuse minerals in a way that respects the environment.

 

 

 

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Alphamin begins commissioning Bisie tin mine in DRC

Africa-focused Alphamin Resources (TSX-V: AFM) has begun commissioning its Bisie tin mine in North Kivu, a remote province in the eastern region of the Democratic Republic of Congo (DRC).

The Mauritius-based miner kicked off construction at Bisie, considered one of the world’s highest-grade known tin deposits, in 2017. At the time, an updated feasibility study projected that the mine could produce 152,300 tonnes of tin over its 12-year life for an initial $126.1 million. It also estimated that Bisie would achieve payback in 17 months.

Commercial production is expected in the second half of the year

Construction of the mine, which is surrounded by dense forest, deeply weathered soils and high rainfall, was completed in the first quarter of 2019.

Alphamin said it remains on track to achieve commercial production in the second half the year­­.

Consumption of the metal increased by 2.5% in 2018, compared to 2017. This year, the International Tin Association (ITA) estimates that global demand will contract by 1%, with a usage forecast of 357,000 tonnes for 2019. The industry group also expects a tin production surplus for the first time since 2013.

Over the longer term, tin demand is expected to continue rising as the metal becomes more integrated into various areas of higher-tech production methods related to high-capacity anode electrode materials. Due to increased demand from electric vehicle makers, global consumption could jump by an additional 60,000 tonnes a year by 2030.

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Russia’s Nordgold injects another $70m into Guinea mine

Russian miner Nordgold (LON:NORD) invested $70 million last year in its Guinea-based gold mine, $22 million more than the total allocated in 2017, the company said on Monday.

Nordgold, which spun off of Russian steelmaker Severstal in 2012, said the funds allowed it to both, extend Lefa mine’s life and improve efficiencies at the operation.

The gold producer, which acquired the mine in 2010, said it since has invested almost $1 billion in the West Africa’s nation. Additionally, Nordgold has paid $180 million in corporate taxes and royalties from 2011 to 2018.

Nordgold acquired the Lefa mine in 2010 and has already invested roughly $1 billion in Guinea.

“We remain committed to Guinea and to driving performance at the Lefa mine,” the operation’s acting manager, Alejandro Rodriguez, said in the statement. “This intensive investment programme will put us in the best position to maximise the value of this major asset.”

This year, Nordgold estimates it would increase its investment in Lefa by 15% to about $80 million.

Lefa is one of the largest gold mines in Guinea, employing almost 1,200 people directly, as well providing over 800 indirect jobs.

The operation has invested significantly to improve the provision of local health and education services, including support in the fight against Ebola, as well as the creation of new medical facilities and some 40 schools.

Nordgold, which acquired many of its major assets during the 2008-2009 financial crisis, also operates in Russia, Kazakhstan and Burkina Faso.

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Coal hurts Anglo American’s Q1 production, 2019 guidance unchanged

Anglo American (LON: AAL) released its first quarter production results on Thursday, reporting decreased production numbers, mostly because of planned disruptions at its metallurgical coal

division, where production dropped 25%.

“Production is 6% lower in the quarter, with two planned longwall moves at metallurgical coal accounting for 80% of the reduction,” chief executive Mark Cutifani said in a statement.

“Isolated production issues at Venetia (De Beers), Kumba Iron Ore and Platinum Group Metals made up the balance, mitigated by stronger operational performance from copper, with a 4% production increase, and the ramp-up at Minas-Rio, which is ahead of plan following the restart of operations in December 2018,” said Cutifani.

De Beers’ diamond production decreased by 8% to 7.9 million carats driven by lower production at the Venetia mine as it transitions from open pit to underground.

Platinum and palladium production decreased by 5% to 471,900 ounces and by 6% to 326,600 ounces, respectively, due to operational challenges as well as one-off benefits in Q1 2018.

Kumba’s iron ore production decreased by 12% to 9.5 million tonnes due to plant maintenance while Minas-Rio’s iron ore production increased by 61% as its ramp-up progresses well, facilitated by access to higher grade ore in the step 3 licence area.

Metallurgical coal production decreased by 25% to 4.2 million tonnes with two longwall moves in the period compared to only one in Q1 2018.

Thermal coal export production decreased by 2% to 6.6 million tonnes, with solid operational performance across the South African mines offset by lower production at Cerrejón due to dust management.

Cutifani added that by the end of the quarter Anglo had increased its production run-rate and are on track to deliver this year’s production targets.

“Our guidance is unchanged,” Cutifani said.

Late Thursday, Anglo American’s stock was down 2.24%, with shares priced at 2,034p on the London stock exchange. The company has a £28.6 billion ($37 billion) market capitalization.

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Ivanhoe to fast-track DRC mine into production after CITIC invests $454m

Ivanhoe Mines (TSX:IVN) is ready to finish building its giant copper mine in the Democratic Republic of Congo after its largest shareholder pumped an additional C$612 million (roughly $454m) into the Canadian company.

China’s state-owned CITIC Metal is paying C$3.98 per share, a premium of 29% over Ivanhoe’s last closing price. The investment, the second major one in less than a year, paired with the Vancouver-based miner's current cash balance of about $512 million, will increase the company's total cash on hand to C$1.3 billion ($1 billion), the parties said.

"The investment announced today will comfortably provide Ivanhoe with the equity cushion required to fast-track Kamoa-Kakula's six million-tonne-per-annum Phase 1 mine to production,” billionaire Robert Friedland, the company’s founder and executive chairman said in the statement.

Friedland, who made his fortune from the Voisey’s Bay nickel project in Canada in the 1990s, has said the capacity of the project’s first phase could later be easily tripled. He believes Kamoa-Kakula has the potential to become the world’s second-largest copper mine.

More to come…

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Top miners back autonomous systems guidelines

BHP, Barrick Gold, Teck Resources and Antofagasta are some of the major mining companies that, together with equipment suppliers and universities, have helped develop global guidelines on automation.

The document, published this week by Canada-based Global Mining Guidelines Group (GMG), outlines a framework for miners to follow when they’re considering adding autonomous equipment to their operations. It also provides a maturity model for companies to emulate as they expand the scope of their unmanned fleets.

Document divides operations into six levels, from zero (entirely manual ) to five (fully autonomous), and assists in the preparation of a business case for autonomous mining for each.

More specifically, the publication divides operations into six levels, from zero (entirely manual operations) to five (fully autonomous operations), and assists in the preparation of a business case for autonomous mining, depending on level and stakeholder needs.

Its advice includes guidance for the slow, phased or fast implementation of autonomous systems, depending on stakeholder needs.

BHP principal, risk and business analysis technology, Chirag Sathe, said the outlined recommendations are relevant even to those who have already embraced autonomy.

“I would say that even though some mining companies have implemented autonomy, it hasn’t been a smooth ride and there are a number of lessons learned,” said Sathe, who also is one of the project’s co-leaders. “This guideline would be a good reference material.”

Although implementing autonomous systems creates new challenges, such as changes to the workforce and the workplace, the authors of the new guideline believe if successfully deployed, the technology adds definite value, with improved safety and efficiency and lower maintenance costs.

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