Broker Notes and Research
Posted: Fri Jul 01, 2022 7:13 am
Australia's gold production growth will be underpinned by sustained elevated gold prices higher than pre-Covid levels over the coming years and a strong project pipeline."
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
Australia Gold Mining Forecast
• 30 Jun 2022
• Australia
• Mining
• Newcrest Mining
Key View: Australia's gold production growth will be underpinned by sustained elevated gold prices higher than pre-Covid levels over the coming years and a strong project pipeline.
Latest Developments
• Australia's gold sector will remain on a growth trajectory over the coming years, supported by a strong project pipeline, elevated gold prices and competitive operating costs. Investment in gold exploration in the country has been rising signficantly in recent years, and the sector has been attracting the most exploration investment since 2016. Solid margins among gold miners and higher gold prices have pushed plans to expand existing mines and develop new mines to advanced stages. Australia holds the world's largest gold reserves, suggesting room to grow in the long term.
• We forecast the country's production to grow by an average of 1% over 2022-2026 and to increase from 10.8moz in 2021 to 13.26moz by 2031.
• Gold production expanded in 2020 despite Covid-19, but by a weak 0.6% y-o-y to an estimated 10.5moz. Growth then picked up in 2021 boosted by the global recovery and rising inflation to 10.8moz, a 3% y-o-y growth rate. We forecast 2022 production growth to hit 2.9% y-o-y, raising production to 11.15moz. However, we note that more recent data released by the Australian Bureau of Statistics and Australia's Office of the Chief Economist shows a slight slowdown in exploration investment. Exploration investment for gold fell in Q421 by 5.9% q-o-q to USD393mn.
• Northern Star's Carosue Dam mine in Western Australia announced its move to renewable power supplied by the Nomadic Energy Project with the help of an AUD1mn grant from Western Australia's Clean Energy Future fund on June 27 2022. Though the project is small, it reflects an accelerating shift among gold miners to minimise diesel and gasoline use and support renewables deployment in Australia.
• On June 20 2022, Metals Australia Ltd. announced the acquisition of 80.0% of Payne Gully Gold Pty Ltd. Payne Gully holds a series of highly prospective battery and precious metals projects at Warrambie, Murchison Domain, and Tenant Creek. It's estimated that the Big Bell deposit and Mt. Gibson mine at Murchison Domain hold roughly 8moz of gold between them.
• Newcrest Mining saw its gold production rise 10.0% q-o-q for its Q322 (Jan.-March), buoyed by stronger prices and a surge in exploration and opex investment from gold miners across Australia. Newcrest produced 479.8koz of gold, a large increase from the previous quarter's 436.1koz but also a significant miss from the target of 535koz set by Citibank.
• In 2019 and 2020, we saw important M&A activity in Australia's gold sector: In November 2019, Saracen Mineral Holdings purchased Barrick Gold Corporation’s 50% stake in Kalgoorlie Consolidated Gold mines. In January 2020, Newmont Goldcorp sold its 50% share of the operations to Northern Star Resources Ltd. Northern Star Resources and Saracen Mineral Holdings then completed a merger, approved by shareholders in January 2021. The merger creates the world's eighth biggest gold producer and Australia's second biggest behind Newcrest Mining, increasing production towards 2moz a year by 2027.
• Australian miner Evolution acquired 100% of the Ernest Henry copper-gold mine from Glencore for USD729mn in November 2021. The sale was finalised in January 2022.
• Newcrest Mining announced planned investments of USD182mn to expand operations at the Telfer gold-copper mine, which includes the Main Dome and West Dome open pit and underground mines over two years in August 2021. Telfer sits near Newcrest's gold-copper mine at Havieron and the company is confident that these investments will provide significant life extension to existing mining operations onsite. Expansion plans in Australia underscored the company's hunt for growth, as it acquired Canadian gold miner Pretium Resources for USD2.8bn in November 2021 in order to rapidly expand into the Americas.
• In November 2020, Oz Minerals announced that it is set to invest AUD47mn towards the expansion of its Prominent Hill copper-gold mine in South Australia. The company intends to spend the majority of the investment on further infill drilling to convert the Prominent Hill inferred resources to reserves ahead of making a final investment decision next year. Its output guidance for the year now stands at 190-200koz, up from 175-190koz due to solid grade reconciliation and improved recoveries. OZ Minerals' USD1.37bn Carrapateena copper-gold project is one of the largest mines being developed in Australia.
• Bellevue Gold's stage two feasibility study at its Bellevue Gold project in Western Australia showed the project promised to be one of the world's leading gold projects in September 2021 based on size and superior profit margins. The company expects the project to produce at least 180koz per annum at an industry-leading discovery cost of USD18/oz and launch production in the June quarter of 2023.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
Australia Gold Mining Forecast
• 30 Jun 2022
• Australia
• Mining
• Newcrest Mining
Key View: Australia's gold production growth will be underpinned by sustained elevated gold prices higher than pre-Covid levels over the coming years and a strong project pipeline.
Latest Developments
• Australia's gold sector will remain on a growth trajectory over the coming years, supported by a strong project pipeline, elevated gold prices and competitive operating costs. Investment in gold exploration in the country has been rising signficantly in recent years, and the sector has been attracting the most exploration investment since 2016. Solid margins among gold miners and higher gold prices have pushed plans to expand existing mines and develop new mines to advanced stages. Australia holds the world's largest gold reserves, suggesting room to grow in the long term.
• We forecast the country's production to grow by an average of 1% over 2022-2026 and to increase from 10.8moz in 2021 to 13.26moz by 2031.
• Gold production expanded in 2020 despite Covid-19, but by a weak 0.6% y-o-y to an estimated 10.5moz. Growth then picked up in 2021 boosted by the global recovery and rising inflation to 10.8moz, a 3% y-o-y growth rate. We forecast 2022 production growth to hit 2.9% y-o-y, raising production to 11.15moz. However, we note that more recent data released by the Australian Bureau of Statistics and Australia's Office of the Chief Economist shows a slight slowdown in exploration investment. Exploration investment for gold fell in Q421 by 5.9% q-o-q to USD393mn.
• Northern Star's Carosue Dam mine in Western Australia announced its move to renewable power supplied by the Nomadic Energy Project with the help of an AUD1mn grant from Western Australia's Clean Energy Future fund on June 27 2022. Though the project is small, it reflects an accelerating shift among gold miners to minimise diesel and gasoline use and support renewables deployment in Australia.
• On June 20 2022, Metals Australia Ltd. announced the acquisition of 80.0% of Payne Gully Gold Pty Ltd. Payne Gully holds a series of highly prospective battery and precious metals projects at Warrambie, Murchison Domain, and Tenant Creek. It's estimated that the Big Bell deposit and Mt. Gibson mine at Murchison Domain hold roughly 8moz of gold between them.
• Newcrest Mining saw its gold production rise 10.0% q-o-q for its Q322 (Jan.-March), buoyed by stronger prices and a surge in exploration and opex investment from gold miners across Australia. Newcrest produced 479.8koz of gold, a large increase from the previous quarter's 436.1koz but also a significant miss from the target of 535koz set by Citibank.
• In 2019 and 2020, we saw important M&A activity in Australia's gold sector: In November 2019, Saracen Mineral Holdings purchased Barrick Gold Corporation’s 50% stake in Kalgoorlie Consolidated Gold mines. In January 2020, Newmont Goldcorp sold its 50% share of the operations to Northern Star Resources Ltd. Northern Star Resources and Saracen Mineral Holdings then completed a merger, approved by shareholders in January 2021. The merger creates the world's eighth biggest gold producer and Australia's second biggest behind Newcrest Mining, increasing production towards 2moz a year by 2027.
• Australian miner Evolution acquired 100% of the Ernest Henry copper-gold mine from Glencore for USD729mn in November 2021. The sale was finalised in January 2022.
• Newcrest Mining announced planned investments of USD182mn to expand operations at the Telfer gold-copper mine, which includes the Main Dome and West Dome open pit and underground mines over two years in August 2021. Telfer sits near Newcrest's gold-copper mine at Havieron and the company is confident that these investments will provide significant life extension to existing mining operations onsite. Expansion plans in Australia underscored the company's hunt for growth, as it acquired Canadian gold miner Pretium Resources for USD2.8bn in November 2021 in order to rapidly expand into the Americas.
• In November 2020, Oz Minerals announced that it is set to invest AUD47mn towards the expansion of its Prominent Hill copper-gold mine in South Australia. The company intends to spend the majority of the investment on further infill drilling to convert the Prominent Hill inferred resources to reserves ahead of making a final investment decision next year. Its output guidance for the year now stands at 190-200koz, up from 175-190koz due to solid grade reconciliation and improved recoveries. OZ Minerals' USD1.37bn Carrapateena copper-gold project is one of the largest mines being developed in Australia.
• Bellevue Gold's stage two feasibility study at its Bellevue Gold project in Western Australia showed the project promised to be one of the world's leading gold projects in September 2021 based on size and superior profit margins. The company expects the project to produce at least 180koz per annum at an industry-leading discovery cost of USD18/oz and launch production in the June quarter of 2023.