New gold mines to bolster sector

Western Australia’s goldminers have continued to thrive in 2021, with the sector raising billions of dollars in the past 12 months. 

Although retreating from an all-time high in August last year, the price of gold has remained well above where it was in 2018 and 2019, largely because of continued economic uncertainty caused by COVID-19. 

It’s influenced by several other macroeconomic factors including vaccination progress, inflation, and the strength of the US dollar. 

That’s evidenced by recent fluctuations in the gold price, which this year has ranged from $US1,683/ounce to $US1,908/oz.

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Much like WA’s iron ore producers, goldminers have continued to benefit from strong prices and other favourable market conditions, providing incentives for companies to begin new projects. 

That has also provided an incentive for junior miners to seek investment for exploration. 

The number of gold projects in the state reached 52 in 2019-20, up from 47 in the prior financial year, according to the latest data from the Department of Mines. 

That figure could grow further, given the ease with which goldminers and explorers are able to raise funds. 

Perth-based HopgoodGanim Lawyers has estimated that, of the $7.6 billion raised by WA resources companies in the past 12 months, $3.3 billion can be attributed to gold companies, with $2.25 billion raised by explorers and more than $1 billion by producers. 

Resources and energy partner Paul Harley told Business News gold companies were taking advantage of an investment window, with examples including Red 5 and Bellevue Gold.

Red 5 is planning to bolster its Darlot operations in the eastern Goldfields by expanding its nearby King of the Hills open-pit and underground mine, south of Leonora, into a standalone mining and processing operation. 

Led by managing director Mark Williams and chairman Kevin Dundo, Red 5 expects King of the Hills to average 176,000 ounces per annum for the first six years of its 16-year operational life, followed by an average of 146,000 ounces a year. 

First gold pour is scheduled for June next year. 

Red 5 acquired the project from Saracen Mineral Holdings in 2017, in the same year it purchased the Darlot mine from South Africa’s Gold Fields and became a producer. 

King of the Hills has reserves of 2.4 million ounces and a net present value of $1.1 billion, as per a final feasibility study completed in September last year. 

It will cost $226 million to develop, making it one of the more costly gold projects under construction in WA, according to Business News.

However, Red 5 has had no trouble securing financing for the project, with $185 million raised from investors since early 2020 and a $175 million loan facility secured with three banks. 

It has awarded the plant construction and mining works to Perth businesses MACA and Macmahon Holdings, respectively, through $650 million and $129 million contracts. 

About 450 jobs will be created during construction, Red 5 says, and 300 during operations.

Bellevue Gold is also on track to developing a project in the Goldfields: a proposed $255 million mine expected to produce 160,000 ounces per annum for the first five years of an initial seven-year operating life, followed by 151,000 ounces per annum. 

The company raised more than $160 million last year to develop its namesake project. 

“We are seeing a perfect storm of conditions for investment in gold companies at the moment,” Mr Harley told Business News. 

“Almost half of capital raised by resources companies in the past 12 months has been by gold explorers and emerging gold producers bringing projects online. 

“This isn’t unexpected, when you consider the typical 10- to 15-year lifecycle of a project from exploration through to development and first gold pour.” 

Mr Harley said a notable trend in the sector was the number of resources companies spinning-out their gold assets into new businesses and listing them on the ASX. 

Among them is new iron ore miner GWR Group, which recently demerged a project into Western Gold Resources, now listed on the ASX, and Blackstone Minerals, having spun-out its non-core gold assets into Codrus Metals. 

Codrus began trading in April (click here to read more about gold listings).

In the Pilbara, Victoria’s Newcrest Mining is developing the Havieron gold and copper project with joint venture partner, UK-based Greatland Gold. 

Newcrest, which operates the nearby Telfer mine and is one of the state’s biggest gold producers, can earn up to a 60 per cent stake in Havieron, having met expenditure requirements for the project. 

In January, its board approved a $146 million early construction cost, ahead of results from a pre-feasibility study expected to be released later in the year. 

Newcrest’s other assets include the Cadia goldmine in NSW, which produced more than 820,000 ounces in 2020, making it Australia’s biggest gold operation. 

Meanwhile, Ramelius Resources’ $120 million Tampia project in the Wheatbelt was recently added to the WA gold sector’s growing list of mines, with first ore mined in June. 

The ore’s scheduled to be trucked to Ramelius’s Edna May processing facility this month. 

The Tampia mine is expected to deliver an additional 186,000 ounces to the company’s annual production, which stood at a record 272,000 ounces in FY21. 

In the Pilbara, Capricorn Metals has begun mining its $155 million Karlawinda project, which is expected to deliver between 110,000 and 125,000 ounces each year.

Probably the most notable exploration company to come out of the Pilbara in recent years is De Grey Mining, which is focused on developing its Mallina project. 

That includes the large-scale Hemi deposit: a discovery unique in its geological structure for the region, De Grey says. 

Led by managing director Glenn Jardine, De Grey has raised more than $150 million in the past three years to develop the project, with an aspirational production target of more than 300,000 ounces per annum for at least a decade. 

The Hemi deposit has maiden reserves of 6.8 million ounces and is located less than an hour’s drive from export site Port Hedland. 

When accounting for regional deposits, the Mallina project has overall reserves of 9 million ounces. 

“The regional deposits are all open, so we are continuing to drill for extensions to the Hemi deposit and, in the near future, we’ll start drilling for extensions to the regional deposits, so we can expect that resource to increase,” Mr Jardine told Business News. 

“We’ve also got drill rigs looking for new discoveries around Hemi, in what we call the Greater Hemi region. 

“We’ve got quite a bit of real estate to explore.” 

Since the Hemi discovery, De Grey says it has identified at least four similar intrusion targets within its 1,200-square-kilometre Mallina tenements. 

The business is due to release the results of a scoping study in the current quarter. It had $87 million in cash at the end of the March.

Other developers of note include Bardoc Gold, Focus Minerals and privately owned ACH Global, which have projects in the Goldfields (see table).

The region is also home to Ora Banda Mining’s Davyhurst asset, where operations resumed earlier this year, after the mine was placed on care and maintenance in 2018. 

The restart cost $45 million and is expected to generate 418,000 ounces over an initial five-year operational life.