Triple-treat gold revival for Cook

The strong rise in the Australian dollar gold price has encouraged gold companies to press ahead with low-cost mine developments, despite uncertainty over royalties.

The number of low-cost gold mine developments in Western Australia is set to rise this year, and Metals X chief executive Peter Cook is playing a key role in three of these projects.

Metals X announced last week it would proceed with development of its Central Murchison gold project, with mining due to start in July.

The project will have annual production of 200,000 ounces over the first 10 years, elevating Metals X up the BNiQ list of WA gold producers.

Like several other gold projects likely to get under way this year, Central Murchison will use existing infrastructure in order to slash the estimated development cost.

“Most importantly, and in keeping with the Metals X style, it presents a low-cost and low-risk development option for our shareholders with a maximum cash drawdown of $42 million and a simple payback of 1.5 years,” Mr Cook said last week.

Broking firm Hartleys is bullish on Metals X, saying in a research note that it offers "one of the best growth profiles of the AUD gold producers and most importantly can be entirely funded with current cash and working capital of $118 million".

As well as its own projects, Metals X is closely involved in Southern Gold’s Cannon project, after negotiating a mine finance and profit share agreement last year.

Southern Gold said the project, located 30 kilometres from Kalgoorlie, was on schedule to start mining in March or April.

It is based on annual production of 68,200 ounces.

Mr Cook is also chairman of Pacific Niugini, which is set to start work on its Nicolsons mine near Halls Creek, after gaining final regulatory approvals last month.

This project has up-front capital costs of just $11 million, and is based on annual production of 30,000oz ounces.

Another company looking to take advantage of existing infrastructure is Norseman Gold, which is recruiting for extra staff to help it expand operations at its flagship mine.

RNI believes the higher Australian dollar gold price will improve its chances of locking in funding for its Grosvenor project, which has an up-front capital cost of $38 million.

RNI managing director Royce McAuslane said revised modelling, based on the recent gold price of $A1,620/oz, had significantly improved the economics of the project.

“Grosvenor has the added advantage of having the permitting and infrastructure in place, including a 1mtpa gold plant,” he said.

“Our aim is to pour our first gold at Grosvenor by the end of the year.”

The low-cost projects planned by these companies follow new open-pit mines developed last year by China’s Hanking Gold Mining and Kalgoorlie-based Phoenix Gold, with Hanking already developing an underground mine.

Larger projects on the horizon include the Deflector project, which Doray Minerals aims to develop after wrapping-up its takeover of Mutiny Gold.

Mutiny said last September the project would cost $63 million to develop, for annual output of 80,000oz.

Gold Road Resources is facing a much bigger spend at its Gruyere project, with development costs estimated at $360 million.

The West Perth company has pressed the button on a pre-feasibility study after a scoping study delivered positive results last month.

Notably, the scoping study was based on a gold price of $A1,350/oz.

By contrast, Metals X assumed a much higher gold price of $A1,636/oz in the revised feasibility study for its Central Murchison project.

That was based on a US dollar gold price of $US1,275/oz and an exchange rate of US78 cents.

By comparison, nickel miner Panoramic Resources, which is evaluating two potential gold developments, is basing its studies on a gold price of $A1,500/oz.

Panoramic assumes a US dollar gold price of $US1,300/oz and an exchange rate of US85 cents.

The uptick in the $A gold price and new project activity has done nothing to dampen the industry’s campaign against the prospect of higher royalties.

“Nothing really changes,” Gold Royalties Response Group spokesperson and Doray Minerals managing director Allan Kelly told Business News.

“The Aussie dollar price is pretty reasonable at the moment but that’s down to the exchange rate.

“Sentiment among investors is driven by the US dollar gold price and that hasn’t moved much.”

Mr Kelly noted that any $A gold price increases would flow through to higher royalty collections under the current regime.