SPECIAL REPORT: The state’s gold industry is planning to invest more than $1 billion in exploration and development to sustain continued modest growth in production.
The state’s gold industry is planning to invest more than $1 billion in exploration and development to sustain continued modest growth in production.
The expected start of mining operations at the $621 million Gruyere project next year could mark a shift in the local gold sector, as the number of new projects slows and miners invest in building reserves at their current operations.
The Gruyere project, which is jointly operated by Gold Road Resources and Gold Fields, will be the third significant mine to come online in Western Australia in about a year, after Gascoyne Resources’ Dalgaranga project and Dacian Gold’s Mt Morgans operation.
However, relatively few major projects appear on the horizon once Gruyere is producing.
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The next big gold mine likely to be built in WA is Capricorn Metals’ $133 million Karlawinda project.
Heath Hellewell-led Capricorn released a feasibility study on Karlawinda last year and is currently finalising the debt component of the project funding.
“Once we’ve got firm term sheets from the banks then we can look at how we tackle the equity component,” Mr Hellewell told Business News.
“Ideally we could have it funded at the end of the year.
“We’d love to begin construction next year.
“If we achieve that it’s basically a 12-month construction phase, so potentially we’re pouring our first gold bars very late next year or early the year after.”
The project includes a 3 million tonnes per annum processing plant and is forecast to produce 100,000 ounces annually over an initial 6.5-year mine life.
After Capricorn, the next significant project closest to development in WA might be Explaurum’s Tampia project in the Wheatbelt.
The company, which is currently the subject of a hostile $59 million takeover bid from Ramelius Resources, released a feasibility study in May detailing a $120 million capital cost for Tampia.
The project currently holds reserves of 490,000oz and has a five-year mine life.
Another potential project is Gascoyne Resources’ Glenburgh mine.
The company is currently focused on ramping-up production at Dalgaranga to 100,000ozpa and says Glenburgh has the potential to double output.
Mr Hellewell said although explorers and developers had found it difficult to raise funds in recent times, the gold sector had a positive outlook.
“It’s been a pretty tough market for anyone who isn’t a producer over the past 12 to 18 months,” he said.
“The market itself has presented some challenges despite a fairly attractive and robust Australian dollar gold price. There just seems to be a bit of a gap between the developers and explorers and the producers.
“I’d say our outlook is positive. I won’t put my finger on any one or two macroeconomic drivers, but we’re pretty optimistic about the Australian dollar gold price going forward.
“And also optimistic about the market starting to realise that there is a lot of value outside of those producers in the up-and-coming projects.”
Some producers in WA have moved to expand their existing operations, led by Melbourne-based St Barbara at its Gwalia mine near Leonora.
The company is nearly halfway through a $100 million extension project, which comprises a ventilation upgrade and paste aggregate fill.
St Barbara is also considering further modifications at Gwalia, with a decision to be made by the end of the year on a $100 million mass extraction project.
The combined impact of the two projects is expected to boost annual output to 290,000oz by 2022.
Last month, Subiaco-based Regis Resources announced a $39 million expansion at its Duketon gold project, which is expected to add 570,000oz over a five-year mine life.
Meanwhile, Newcrest Mining approved a $93 million upgrade at its Telfer gold mine last year, which is set to extend operations from 2019 until 2023.
Exploration
A number of local miners are ramping-up expenditure during the 2019 financial year as they seek to increase production at current projects.
Bill Beament-led Northern Star Resources has flagged a $60 million exploration budget, up from about $35 million last year.
Northern Star said it was focused on converting a significant share of the company’s 15.9 million ounce resource base into reserves.
After announcing annual production of 575,000oz in FY18, the Perth-based producer has provided guidance for 2019 of between 600,000oz and 640,000oz for its WA operations at an all-in sustaining cost of $1,025-$1,125/oz.
Mid-tier miner Saracen Mineral Holdings has also announced a $60 million exploration spend for the coming year after investing $17 million last year.
Led by Raleigh Finlayson, the company recently boosted its reserves by 20 per cent to a record 2.5 million ounces.
Saracen also announced a guidance of between 325,000oz and 345,000oz for FY19 following production of 316,000oz last year.
“With almost 9 million ounces in resources and drilling generating strong results across our assets, we are confident of achieving our objective of becoming a 400,000oz per annum gold producer with long mine life,” Mr Finlayson said.
Melbourne-based Newcrest is set to spend $95 million on exploration in Australia in FY19, while South Africa’s Gold Fields has an $85 million budget in WA.
Other local miners spending on exploration include Evolution Mining ($40 million), AngloGold Ashanti ($50 million) and St Barbara ($17 million).
Newmont Mining was the state’s largest producer in FY18, and the company typically spends about $50 million on exploration across its Australian operations.
Newmont senior vice-president Australia, Alex Bates, told Business News the US-based miner was committed to maintaining investment in WA.
“We plan to continue to make significant investment into exploration in WA, and at our existing sites we have quite large brownfield programs,” Mr Bates said.
“And we do also have greenfield locations across the site.
“The aim of that is to continue to grow our reserves and resources with the aim to more than replace depletion.”
Mr Bates is buoyant about the state of the local gold sector.
“I think we’re in really good shape as an industry,” he said.
“There’s a bit of a dearth of tier-one assets at the moment in terms of new exploration and new findings, but that’s why it’s so important that we continue to focus on exploration.
“Because the assets are getting older, the costs will naturally increase as we go deeper in our underground and deeper in our open pits, with a declining gold grade in most operations.
“So, I think the industry is in good shape but I think we need to continue to invest in the future through reduced costs and increased exploration.”
Mr Bates said Newmont was also expected to begin work on a $133 million expansion at the Super Pit in Kalgoorlie by the end of the year.
