MINERS QUARTERLY

Sneak peak of next quarter’s issue – diamonds!

visionworthy-blog — Sat, 27 Sep 2014 03:47:01 -0400

Sneak peak of next quarter’s issue – diamonds!

Exploration crisis could wipe out open-pit gold mining in the West

visionworthy-blog — Sat, 27 Sep 2014 03:36:52 -0400

Northern Star Resources managing director Bill Beament says the gold industry is facing an “exploration crisis” that could see open-pit gold mining in Western Australia all but wiped out in a decade.

Speaking at a West Australian Mining Club function in Perth yesterday, Mr Beament argued a proposed lift in gold royalties being considered by the WA government could exacerbate a decline in mining activity in the state.

“An eight-year-old can see that if we don’t find more minerals at a far faster rate than is currently the case, the mining industry is going to die,” Mr Beament said.

“There are a number of issues that get far more attention than this exploration crisis, and yet this is as important to Australia’s future as any of them.”

WA gold miners have formed a coalition to lobby against the proposed royalty rise, with the outcome of the government’s review into the issue expected by the end of the year.

While Northern Star has committed $50 million to exploration across its portfolio of assets next year, Mr Beament said exploration activity across the industry as a whole was in decline.

“The painful reality is that at this rate in Western Australia, in 10 years’ time, will only have one open-pit gold mine in production, being Boddington. That reflects many factors, including the simple truth that Western Australia’s remaining deposits are deeper and harder to find,” he said.

“Exploration in the state is becoming an even higher risk investment. The policy framework needs to reflect that changing reality.”

Northern Star’s exploration efforts at its Paulsens underground mine helped it improve the operation’s performance, setting it up for a suite of mine acquisitions over the past year.

The acquisitions from gold heavyweights Newmont Mining and Barrick Gold have transformed Northern Star into Australia’s second-largest gold miner behind Newcrest Mining.

The excitement around the acquisitions propelled Northern Star’s market capitalisation above $1 billion, but its share price has dropped more than 30 per cent since it peaked in mid-August. The share price fall has far outpaced the 6.6 per cent drop in the US dollar gold price and the 1.3 per cent fall in the Australian dollar gold price over the same timeframe.

Mr Beament blamed the recent share price weakness on collapsed financial services firm Van Eyk, which has been rebalancing some of its gold holdings.

Mr Beament said the share price weakness masked a strong reception the company had received during a roadshow to North America and Britain. Filings lodged with the ASX this week shows Van Eck’s interest in Northern Star has fallen from 11.17 per cent to 9.36 per cent.

But the selldown by Van Eyk has been somewhat offset by continued buying by the world’s largest resources investment fund Blackrock, which has grown its stake in Northern Star from 13.2 per cent to 14.2 per cent.

Colombia court halts gold mining in nature reserve

visionworthy-blog — Sat, 27 Sep 2014 03:34:54 -0400

A Colombian court ruled 11 gold miners must cease operations in a nature reserve, part of an ongoing drive toformalize the mining industry.

The Antioquia superior court ordered mining agency ANM to evict miners from the 50,000ha protected area in the northwestern Chocó department, home to the Embera Katío indigenous people.

Miners with operations in the area include AngloGold Ashanti and local companies Exploraciones Choco Colombia, Gongora and El Molino, according to local newspaper Portafolio. The government awarded mining concessions in the area in 2008, it said.

ANM said the concessions were awarded before the area was declared a reserve and denied it had authorized concessions after legislation in 2013 decreed the area off-limits to mining, agriculture and industry.

“Since starting operating two-and-a-half years ago, the national mining agency has not awarded concessions that overlap reserved areas either totally or partially,” ANM president Natalia Gutiérrez said in a statement. “

Unauthorized mining accounts for more than half of the country’s operations. In a 2010-2011 census on mining activity in Colombia, the mining ministry (Minminas) registered 14,357 mining production units in Colombia of which 63%, or over 9,000, did not have mining titles.

Illegal gold mining has spread in Colombia, Peru, Ecuador and Bolivia as gold prices jumped sevenfold over a decade to US$1,900/oz by 2011, according to Thomas Hentschel, director of Swiss government program Better Gold Initiative.

Officials from Colombia, Bolivia, Brazil, Ecuador, Guyana, Suriname, Venezuela and Peru met at an Amazon Cooperation Treaty Organization (ACTO) meeting in November to discuss joint efforts to fight illegal mining in the region.

BNamericas will host its 2nd Mexico Mining Summit in Mexico City on October 1-2.

Gold price seen near tipping point for mine cuts, closures.

visionworthy-blog — Sat, 27 Sep 2014 03:32:45 -0400

(Reuters) - The price of gold, down more than a third in three years, is approaching the tipping point where the mining industry would see a spike in the number of producers reducing output or even shutting down operations.

Several mines globally have already suspended output in the past 18 months, but not as many as industry watchers expected as producers focused on slashing costs and reworking mine plans to extract more profitable, higher-grade ounces.

But with bullion’s slide this week to a nine-month low of $1,208.36 an ounce, those defenses may not be enough.

“$1,200 is a critical level. The industry has geared itself around $1,200,” said Joseph Foster, portfolio manager at institutional investor Van Eck Global. “If it falls below that level, then there are a lot of mines around the world that are really going to struggle.”

Van Eck is a major investor in Barrick Gold Corp and Goldcorp Inc and a top shareholder in most other large gold producers.

Production cutbacks and mine closures would spell more financial pain for producers and investors, who have watched gold mining stocks slump 67 percent since September 2011.

And cuts and closures could be swifter and deeper than in the last gold bear market as most miners this time around have not offset the risk of potential losses by hedging - the practice of selling gold forward at a fixed price.

At the end of June, only a tiny fraction of production - around 129 tonnes - was hedged compared with the last bear gold market in the 1990s when hedging peaked at around 3,000 tonnes. The practice fell out of favor when hedged producers were unable to capitalize on rising gold prices between 2000 and 2012.

“TERRIBLE, HORRIBLE PRICE”

In response to weaker bullion, gold miners are estimated to have slashed their all-in cost of producing an ounce of gold to an estimated $1,350 in the first half of 2014, according to data from Thomson Reuters’ GFMS metals research team. That was down from $1,696 an ounce for full-year 2013.

Even so, Citibank estimated last month that 40 percent of the gold industry was burning cash at an all-in cost of $1,331 an ounce. But that was at a gold price of $1,290 an ounce. Bullion was last trading at $1,217 an ounce on Wednesday.

“How many guys are going to get up and say this is a terrible, horrible price and we can’t survive at this price? Because we can’t,” Doug Pollitt of Pollitt & Co, a Toronto-based brokerage firm, said at the annual Denver Gold Forum last week.

Industry participants were loathe to single out specific operations that could cut or shut down production but high-cost mines are at greater risk.

For example, Iamgold Corp and AngloGold Ashanti Ltd’s Yatela mine in Mali had all-in sustaining costs (AISC) of $1,910 an ounce in the quarter to end-June. The operation halted active mining in 2013 due to high costs and weak gold prices but continues to process stockpiled ore.

“This year, as the gold price continues to remain below $1,300 per ounce, we are considering bringing an end to the movement of ore onto the stockpiles and to just continue to leach the ore already on the pad until 2016,” Iamgold spokesman Bob Tait said in an email.

Other high-cost producers include St Barbara Ltd’s Simberi gold mine in Papua New Guinea, which reported AISC of A$2,300 ($2,039) an ounce in the June quarter. Anengineering program is underway at Simberi to improve plant performance.

Iamgold’s Rosebel mine in Suriname had AISC of $1,216 an ounce in the three months to end-June.

SUPPORT FOR GOLD PRICES

To be sure, some in an industry known for its optimism see a proverbial silver lining: they believe that a sharp drop in production will help to lift prices.

While gold is also a financial asset that can benefit from uncertainty and inflation fears, some investors and executives say less supply cannot help but put a floor under bullion.

Miners will remain loathe to invest in new projects at gold prices below $1,500, said Douglas Groh, a portfolio manager at Tocqueville Asset Management.

“Two years from now end-2016, 2017 and even into 2018, the markets will recognize that there isn’t new capacity coming on stream … Certainly the gold price will jump,” Groh said.

For Goldcorp CEO Chuck Jeannes, the industry is close to “peak gold,” an expression that means production is at its all-time high as deposits get harder to find as existing production gets mined out.

“I don’t think that we will ever mine as much gold as we do in 2015. That’s positive for the gold price,” he said in an interview.

(1 US dollar = 1.1282 Australian dollar)

First issue of Miners Quarterly is available now! Check out your...

visionworthy-blog — Sat, 27 Sep 2014 03:27:00 -0400

First issue of Miners Quarterly is available now! Check out your local news agent’s today.

The Real Price of Gold

visionworthy-blog — Sat, 27 Sep 2014 03:15:40 -0400

As the saying goes, ‘All that glitters is not gold’. And gold mining is certainly not what it seems. With the global economy in a precarious position, the price of gold has reached record highs. Mining companies are now expanding into gold mining, hoping to profit from our insatiable appetite for the precious metal. The desire for gold has never been greater, which brings us to the great lengths humans and mining companies will go to get their hands on gold.

Read the full article here.