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No clear preference as gold miners eye expansion in North America, Australia

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

Essential Metals & Mining Insights - August 2020

State of the Market: Mining Q2-2020


No clear preference as gold miners eye expansion in North America, Australia

Gold producers Regis Resources Ltd. and AngloGold Ashanti Ltd. are weighing further expansion in North America and Australia, but experts at the Diggers & Dealers Mining Forum in Kalgoorlie, Western Australia, differ over the pros and cons of both jurisdictions.

AngloGold Senior Vice President Australia Michael Erickson told media on the sidelines of the forum Aug. 6 that the company was open to acquiring projects in Australia and North America.

However, it is already spending between US$450 million and US$500 million to redevelop the Obuasi gold mine into a modern operation over the next 2.5 years and "contemplating what we're going to do in Colombia," having suspended exploration work at its La Colosa project in 2017 after locals voted to ban mining in Tolima.

"There is an absolute appetite to improve the portfolio mix, and it's not a secret that we're likely to reduce our footprint in South Africa even further, and Australia and North America are very much focus areas," Erickson said. "We're in a far better position, and I don't think for a moment that we wouldn't be keen to acquire something else in Australia."

Considering the factors possibly favoring expanding in North America, Erickson said AngloGold sold the Cripple Creek and Victor project in Colorado to Newmont Mining Corp. in 2015, is exploring in Minnesota and has "quite a bit of ground" in Nevada. He even joked that, with his new CEO, Kelvin Dushnisky, being Canadian, "I don't know if we're going to end up in a bit of a battle about Canada versus Australia."

In Australia, AngloGold produces at the Sunrise Dam and Tropicana mines, and the company also signed an agreement to earn up to 70% in Saracen Mineral Holdings Ltd.'s Butcher Well and Lake Carey tenements by spending up to A$25 million, which may present the opportunity to replace low-grade stockpiles at Sunrise.

Experts differ on pros and cons of North American expansions

However, Deloitte's Western Australia mining leader, Nicki Ivory, told S&P Global Market Intelligence on the forum sidelines that North America could have the edge over Australia due to the latter's smaller economy and pool of workers. Ivory said companies are also reporting problems getting workers in from overseas due to issues around temporary skilled visas, known as 457 visas, which the Australian federal government has been reforming.

Ivory said Australia's labor market suffers shortages more easily, as seen in the last mining boom, than has been the case in North America. Deloitte launched a new report, The Mining Matrix, at Diggers & Dealers, which called on miners to "turn around the image of mining" through innovation, digital transformation and redefining the way work is done and delivered.

ASX-listed Gold Road Resources Ltd. CEO Ian Murray recently confirmed he was eyeing North America for potential acquisitions. Regis Resources Executive Chairman Mark Clark told reporters on the forum's sidelines that he had looked at North America but was skeptical, saying "we want to stay in Australia if we can."

Clark is not convinced that North American gold companies are being undervalued and said their relative market values reflect their relative performance. For the first time in his 25-year career, there has been a sustained period where significant producers in Australia have been profitable and delivering well, while North American assets have been relatively higher-cost.

Clark said labor is still "relatively expensive" in North America, while there are "technical challenges" with many Canadian projects, which sometimes need significant damming of lakes and have related issues that blow out capital costs, to say nothing of First Nations property rights issues.

"So I'm not sure there's necessarily a panacea for an Australian gold producer to go to North America and say 'we can do things remarkably better than those guys,' Clark said. There might be some, but more often than not, it's reflective of the legal and physical regime; you're mining things in snow fields or whatever.

"As a general rule, those [North American] projects tend to be, for a number of reasons, more challenging and more costly than what we've seen in Australia."