Gold
Feature Articles
Gold Supply Upside
July 2021
Gold is trading at around US$1,800/oz, while nearly 10% lower than last year's spike to record levels fuelled by the pandemic, it is still well above the five-year average. Higher prices are encouraging investment and output, which has been sliding over the last few years. AME's base case of new projects coming online over the medium-term through 2025 includes 16 projects—with two each in Asia, Africa, Europe and Australia, and four in both North America and Latin America.

Africa

Perseus Mining Limited declared commercial production in the March Quarter at its third gold mine, Yaouré, in Côte d’Ivoire. Yaouré is expected to produce more than 200koz gold per year over the first five years of its mine life at an average all-in sustaining cost (AISC) of around US$734/oz. Perseus will undertake exploration with a goal to materially extend the current 8.5-year mine life of Yaouré. The project had a capex of US$265m. The current mineral resources of 3.8Moz, including 1.56Moz of ore reserves.

Endeavour Mining has successful integrated its newly acquired Teranga assets to create the Sabodala-Masswa complex in Senegal. The West Africa-focused company agreed to buy Teranga Gold in an all-share US$2bn deal in November last year. The company says it is on track to meet its 2021 financial year guidance of between 1.36-1.49Moz. Going forward, exploration efforts are expected to be focussed on the newly acquired mines, which also includes the Wahgnion mine in Burkina Faso, with the aim of extending their lives.

 

Asia

Emerald Resources has begun first ore feed and wet commissioning of its Okvau gold processing plant in Cambodia. First maiden gold pour is expected in June. Okvau has a resource of 1.14Moz grading 2g/t gold that includes an ore reserve of 907,000oz. It is expected to produce 106kozpa of gold at an all-in-sustaining-cost of US$754/oz. Using a US$1,450/oz gold price, the project is expected to generate after-tax NPV (5% discount) of US$238m and an IRR of 57%. Payback is expected in just 1.7 years and there is significant potential for Emerald to grow the current resource.

Australian gold explorer Nusantara Resources is advancing its 75%-owned Awak Mas gold project in Sulawesi, Indonesia. The ASX-company said the FEED is nearly complete—in preparation for an EPC contract with Petrosea—and will form the basis of the mine’s definitive feasibility study (DFS) set to be updated this month. Capex is estimated at US$15m but may be raised. Nusantara announced a maiden measured resource of 2.2Mt at a grade of 1.58g/t for 0.11Moz of gold in March following a diamond drilling program. Awak Mas hosts an ore reserve of 35.6Mt grading 1.33 g/t for 1.53Moz of contained gold. IDX-listed Indika Energy, which owns 25% of Awak Mas, wants to takeover Nusantara—whose shareholders will vote on the proposal in September.

 

North America

Aquila Resources is currently advancing pre-construction activities for its flagship 100%‐owned Back Forty gold project in Michigan, US. Back Forty contains resources of 1.1Moz of gold and 1.2Blbs of zinc, with exploration upside. It has an after-tax NPV (6% discount) of US$176.3m with an IRR of 26.1% at a gold price of US$1,485/oz. Life of mine production is over 1.5Moz, and capex is estimated at US$250.4m. An optimized feasibility study is underway and set to be completed in the December quarter of this year.

The new study will incorporate the underground mine plan, lower the project's environmental footprint, and will include a longer mine life. This follows the company being denied a wetlands permit in January, which in May it said it would not appeal. Aquila said it was also working to secure the remaining permits needed to commence construction and operations. To help facilitate the project, Aquila sold its copper and gold exploration projects in Wisconsin to a start-up company for about US$5.8m.

 

 

Sabina Gold & Silver Corp is focussing on pre-development work at its 100%-owned Back River Gold District in Nunavut, Canada. It an 80km long belt, which hosts six properties: Goose, George, Boulder, Boot, Del and Bath, with most work being done at George and Goose. Sabina said in April that the Goose site had re-opened with detailed engineering expected to be completed in the second half of 2021, to help advance the project towards a production decision. Sabina also said it returned to its George property for the first time since 2013 to undertake a drilling program.

Sabina recently filed an updated feasibility study which presents a project that will produce 223kozpa of gold  (first five years average of 287kozpa with peak production of 312koz in year three) for 15 years with a payback of 2.3 years, a post-tax IRR of 28% and NPV (5% discount) of C$1.1bn (US$878k). The project received its final major permit in June last year and now holds all major permits and authorizations for construction and operations.

 

 

Agronaut Gold Inc. said this month that construction at its 100%-owned Magino project in Ontario, Canada, continues to advance on schedule. The TSE-listed company said it had received the majority of pre-production mining equipment on-site with 100% of the stripping and most excavation also completed. Initial capex had been put at US$321m in a 2017 feasibility study but Argonaut said it had received recent estimates between $360-$380m. Measured and indicated resources at Magino stands at 144Mt grading 0.91g/t gold for a total of 4.2Moz.

Magino is expected to produce an average 150koz of gold over the first five years of a 17-year open pit at all-in sustaining costs of US$711/oz, with an NPV (5% discount) of US$288m and an IRR of 19.5%. Agronaut is targeting first gold by the December quarter of 2022, commercial production by the June quarter of 2023, and full production by the September quarter of that year. Argonaut, which merged mid-year with Alio Gold, has the El Castillo complex and La Colorada mines in Mexico and Florida Canyon in Nevada, plus the advanced Cerro del Gallo project in Mexico.

Endeavour is currently advancing the Terronera mine in Jalisco, Mexico, towards a development decision. A feasibility study is expected in the September quarter. The final 2020 pre-feasibility study outlined an after-tax NPV (5% discount rate) of US$137m, IRR of 30% with a payback period of 2.7 years at base case prices of US$1,419/oz gold and US$15.97/oz silver. Initial capex is estimated at US$99m with a US$2.10/oz AISC, in the lowest decile of operating silver mines. Production is estimated at 3.0Mozpa for silver and 33kozpa for gold over a 10-year initial mine life.

 

Latin America

Equinox Gold has begun operations at its Santa Luz gold mine in Brazil, which is on track to start commissioning in the December Quarter. The Canadian miner, who is expecting first gold pour in early 2022, is currently focusing on removing waste and developing infrastructure such as access roads, ramps and dumping zones. The historic mine, which was shut in 2014, is expected to produce 100kozpa and generate US$436m in net cash over its 9.5-year lifespan.

 

 

Fortuna Silver Mines achieved steady state production at Lindero in Argentina in the March Quarter, following the first gold pour in October last year. Total gold production totalled 22,332oz in the first three months of 2021 at an all-in sustaining cash cost per gold ounce sold of US$1,055. Fortuna plans to produce between 140-160koz of gold at Lindero in 2021. Lindero has reserves of 82.7Mt averaging 0.62g/t containing 1.65Moz of gold, with a 12-year pit life. Fortuna is spending US$320k this year on an exploration program at Lindero to look for additional mineralization.

Minera IRL Limited is currently advancing the Ollachea gold project in Peru. The BVL, CSE-listed company is focussing on completing a new Preliminary Economic Assessment (PEA), developing an execution plan and securing financing. The new PEA is designed to get the project into production as soon as possible with a simplified staged approach—taking advantage of advances in orebody knowledge and technologies— rather than the original 2012 design. It is expected to be completed this year. Ollachea has reserves of 1Moz and resources of 1.4Moz. It is expected to produce 70koz for the first three years, before expanding to 100koz. Initial capex is about US$80m.

Belo Sun Mining is advancing the largest undeveloped gold deposit in Brazil—its advanced-stage Volta Grande project in Pará State. The TSX-listed company said it is preparing for the start of construction, by optimising its mining and engineering plans, while looking at funding options with potential JV partners.

The project, which comprises a land package of 120km on the Tres Palmeiras greenstone belt, received a construction license in 2017. Average annual gold production is estimated at 268kozpa for the first 10 years at 1.38g/t for life of mine gold output of 3.53Moz. ASIC operating costs are estimated at US$799/oz. The 2015 feasibility study outlined a post-tax NPV (5% discount) of US$665m, post-tax IRR of 26% and a payback period of 4 years at a US$1,200/oz gold price. At a US$1,650/oz gold price, NPV (5%) is US$1.8bn, IRR of 56% and payback period of 2 years. Capex was revised last year to US$298m. Volta Grande has a gold resource of 5Moz, reserves of 3.8Moz and long-term exploration potential.

 

Australia

Capricorn Metals has commenced the commissioning phase at its Karlawinda Gold Project in Western Australia. Capricorn plans to produce between 110-125koza of gold from mid-2021. The company expects first gold production by the end of June. Capex remains within the guidance range of A$165-170m. 

Kin Mining NL's 100%-owned Cardinia is located in the North-Eastern Goldfields region of Western Australia. The ASX-listed company recently updated Cardinia's mineral resource estimate to 30Mt at 1.28g/t for 1.23Moz of contained gold. It has an estimate ore reserve of 7.9Mt at 1.1g/t gold for 283koz.Kin expects to release further resource upgrades in the September quarter, with recent drilling returning “outstanding” results.

During the March quarter, Kin completed a A$12.8m (US$9.5m) capital raising to fund exploration and development at Cardinia. Kin in June purchased a 1.5% third-party net smelter royalty (NSR) covering future production at Cardinia from Sprott Private Resource Lending for US$600k for the first 100oz of gold produced—with the price tag representing just 22% of the royalty’s face value.

 

Europe

Dragon Mining Limited is advancing its 100%-owned Fäboliden gold mine in northern Sweden. The resource is 11Mt grading 3.1g/t gold for 1.1Moz of contained gold. The reserve is 2.3Mt grading 2.8g/t for 210koz.  The updated life of mine (LOM) study proposed an open-put mine with an eight-year mine-life, which is based on the haulage of ore to Dragon's Svartliden Plant. The HKG-listed company continues to work towards obtaining environmental approval for full-scale mining at Fäboliden.

 

 

Canada’s Eldorado Gold Corp ratified an agreement with the Greek government in March to allow Skouries to complete construction and transition into production. Skouries was previously placed in care and maintenance in 2017 due to the company's impasse with Greek authorities. Eldorado's new investment plan has been revised to $3.1bn from $1.4bn, which also includes expansion of its Olympias mine to 650ktpa (2021 estimate 443kt) and further exploration at Mavres Petres-Stratoni. The agreement also includes a 10% increase in royalty rates for all contained metals.

Skouries' reserves of 3.8Moz at 0.74 g/t gold and 1.7Blbs at 0.49% copper support a 23-year mine life at an average annual production of 140koz of gold and 67Mlbs of copper with production from both open-pit and underground. Capex is estimated at US$689m, after-tax NPV (5% discount) of US$925m, IRR of 21.2% and a payback period of 3.4 years (gold price of US$1,300/oz and copper price of US$2.75/lb). Eldorado is continuing to advance technical work and evaluate financing options for Skouries. Eldorado anticipates construction would take 2.5 years.