Mixed results for gold miners as output hits 6.6m oz

WA’s 30 gold miners achieved a small increase in aggregate output last year with the state’s biggest producer, Newmont Mining, making up about a sixth of this at 1.1m ounces, research by Business News has found.

Gold production in Western Australia rose marginally to 6.6 million ounces last year, as exploration spending in the sector increased to $592 million.

With minimal contribution from new projects coming online, the state’s overall increase in production mainly reflected higher output by Anglogold Ashanti and Ramelius Resources, along with modest increases by several mid-tier miners.

This offset production falls at WA’s two biggest miners, according to the annual BNiQ Search Engine ranking of gold producers in WA.

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WA’s small increase in production came as national output hit its highest level in 20 years, rising to just less than 10 million ounces, according to Surbiton Associates.

That meant WA’s share of Australian production was steady at about two thirds.

The news for WA was more positive on the exploration front.

Exploration spending in WA was up 16 per cent in FY18 and made up 73 per cent of the national spend.

That was close to FY17’s share of 74 per cent.

The big miners

US-based Newmont Mining remained the largest producer in the state despite a 100,000 ounce drop-off at its Boddington operation, which is the state’s largest mine.

Newmont produced about 1.1 million ounces across Boddington and its 50 per cent stake in Kalgoorlie’s Super Pit.

Senior vice-president Australia Alex Bates told Business News the fall in production was part of a planned ‘layback’ at the site.

“That was planned, it was expected and it’s due to a layback we are doing,” Mr Bates said.

“We’re pushing back a large portion of our southern pit; it’s always been part of the process.

“It’s consistent with our guidance; it’s consistent with our outlook, it is temporary and we’re expecting to see the production at our Boddington operation come back up significantly in the years to come.”

In contrast to Boddington, output at the Super Pit was steady last year. However, a rock fall in May triggered a 100,000oz downgrade in the company’s 2018 calendar year guidance.

South African outfit Gold Fields retained its position as the state’s second largest miner after recording output of 894,000oz in the 2018 financial year.

That was down 50,000oz on the prior year, primarily due to the sale of the Darlot mine to Red 5.

AngloGold Ashanti has jumped into third spot on the rankings after big increases in output at both its Sunrise Dam and 70 percent-owned Tropicana mines, to a combined 611,000oz.

Senior vice-president Australia Mike Erickson attributed the rise at Tropicana to improvements in the processing plant.

“We’ve got the process plant absolutely humming, so we’ve got increased volumes through the plant,” Mr Erickson said.

Northern Star Resources fell back to fourth, despite improving output 8 per cent to 575,000oz.

Melbourne-based Newcrest Mining is the state’s fifth largest producer, with its Telfer mine in the Pilbara producing 426,000oz, up on last year’s result of 386,000oz.

Barrick Gold, which partners with Newmont at the Super Pit, produced 365,000oz.

Regis Resources (361,000oz) improved its production, along with Saracen Mineral Holdings (316,000oz) and Melbourne-based St Barbara (268,000oz).

Westgold Resources’ output fell to 253,000oz after it sold the South Kalgoorlie mine to Northern Star in March.

Among the mid-cap miners, the most improved producer during the past year in WA was Ramelius Resources.

Ramelius was able to boost production from 125,000oz to 208,000oz, primarily due to the acquisition of Edna May from Evolution last year.

The strong performance capped a solid period of growth for the company, which produced just 74,000oz in FY14. 

Managing director Mark Zeptner said Ramelius was proud of its continued improvement.

“One of the things we highlighted at Diggers more so than in the past was actually what we’ve done over the past four years or so,” he said.

“We’ve built up quite a track record, we believe, of growing production and growing cash and obviously ultimately growing shareholder value.”

Takeover deals

Ramelius recently launched a $59.2 million hostile takeover bid for exploration company Explaurum, which is aiming to develop its Tampia Hill project in the Wheatbelt.

Mr Zeptner said the acquisition was part of the company’s growth strategy, designed to attract investor interest.

“What we’ve identified is that there are a whole lot of 100,000oz producers, and you probably need to be in that 250,000 to 300,000oz bracket to become relevant, and we’re on our way there,” he said.

If the takeover succeeds, Ramelius would consider trucking ore from Tampia to its Mt Magnet operations, about 130 kilometres to the north.

“We have a model around Mt Magnet where we look to acquire assets to truck in to a central point,” Mr Zeptner said.

“And we’d probably look at Tampia Hill in the same light, but we like the project in the first instance, as it is, where it is, and it’s got its own robust economics.”

Northern Star’s recent $347 million acquisition of the Pogo mine in Alaska represents the largest gold deal in the past 12 months.

The gold miner said the operation would add between 250,000oz and 260,000oz in FY19 (although it won’t be included in the BNiQ calculations, which focus on production in WA).

St Barbara has taken a different approach with its acquisition strategy, investing $21 million in four junior explorers, including a $4 million equity stake in Duketon Mining.

New producers

Two new producers have joined the ranks this year, with Dacian Gold’s Mt Morgans mine coming online in April, while Gascoyne Resources poured first gold at Dalgaranga in May.

The $200 million Mt Morgans project features a 2.5 million tonnes per annum processing plant, with the company targeting production of between 180,000oz and 210,000oz in the 2019 financial year.

Dacian chief executive Rohan Williams said construction of the project had been completed on time and on budget.

Gascoyne’s $86 million Dalgaranga operation is located in the Murchison region and has an annual output of 100,000oz, with a current mine life of six years.

“We have built a 100 per cent-owned new gold processing facility and associated infrastructure under budget and ahead of schedule, and now poured first gold,” managing director Mike Dunbar said.

Problem projects

One project to have experienced difficulties during the construction phase is Gruyere, half-owned by Gold Road Resources.

In July, the company said the cost of the mine, which is a 50:50 joint venture with Gold Fields, had increased to $621 million.

That followed an announcement in April in which Gold Road said the project would come in at the upper end of the capital cost estimate between $506 million and $585 million, after initial estimates place expenditure at $532 million.

The company also flagged schedule delays, with first gold expected for the June quarter of 2019, rather than March.

The cost overruns and delays have been attributed to heavy rainfall during the March quarter.

At the smaller end of the scale, Kin Mining was forced to suspend construction at its $35 million Leonora gold project in May after a review by Como Engineers confirmed increases in pre-production capital costs.

A review was undertaken after managing director Don Harper resigned in February.

Meanwhile, struggling gold producer Eastern Goldfields suspended all mining operations this month as it completes a strategic review of its business and searches for a recapitalisation deal.

Eastern Goldfields said the decision meant that nearly 40 employees had been made redundant.

Contracts

The increase in production across the state has coincided with a number of significant mining services contracts being announced, including two major extensions.

Welshpool-based MACA will continue to undertake open-pit mining services at Regis Resources’ Duketon South operations, after locking in a five-year extension worth $590 million.

Barminco recently inked a $700 million extension to its mining services contract at AngloGold’s Sunrise Dam for the next five years.

The mining contractor has partnered with the miner at Sunrise Dam since underground operations began in 2003.

NRW secured a $300 million mining services contract at Gascoyne’s Dalgaranga project, with the contractor undertaking open-pit mining, together with drill and blast operations, at four pits.

In June, Swick Mining Services was awarded a contract extension at Northern Star’s Jundee mine.

GR Engineering Services recently locked in an $18 million contract for a paste backfill plant at Saracen’s Carosue Dam operations near Kalgoorlie.