Gold gleams as prices surge
By Anthony Fensom

Gold ‘bugs’ are out in force, with the price of the precious metal topping US$2000 an ounce amid warnings of a US recession, and as interest rate rises peak.

On 13 April, the gold price hit a new one-year high of US$2037 – its highest level since March 2022, and near its record high of US$2075 – minutes after the US Federal Reserve System (the Fed) suggested a potential pause to further US rate hikes.

‘That’s an underlying positive environment for gold, where the Fed is done with [its] interest rate hike cycle, yet inflation overall remains higher than [it] would like,’ David Meger, Director of Metals Trading at High Ridge Futures, told Reuters.

Analysts at investment bank Citi see gold potentially reaching US$2300 an ounce within a year, while CMC Markets predicts that the price could hit US$2600 should the Fed pivot earlier than expected from raising rates, to cutting them. Bank of America sees gold reaching US$2200 an ounce in the fourth quarter of 2023, assuming an end to the hiking cycle.

While exchange-traded funds (ETFs) have been net sellers of gold for the past two years, ING has reported a recent trend reversal, with ETFs becoming net buyers in March 2023.

Central banks have been keen buyers, with demand more than doubling in 2022 to reach 1136 tonnes – up from 450 tonnes in 2021, and hitting a 55-year record high according to the World Gold Council (WGC).

Total annual gold demand was up 18 per cent in 2022, hitting 4741 tonnes – its highest level since 2011, according to the WGC’s 31 January report.

Together with central bank buying, investment demand also gained 10 per cent in 2022, with gold bars and coins in strong demand from investors. Despite this, jewellery demand dropped three per cent, largely due to China’s COVID-19 lockdowns.

Total annual gold supply rose two per cent year-on-year to 4755 tonnes, while global mine production reached a four-year high of 3612 tonnes.

Australian production rise

With the largest known share of gold resources, and as the world’s current second-largest producer, Australia is set to benefit from gold’s upturn.

Australian gold mine production rose by 2.4 per cent to 315 tonnes in 2022, and is expected to reach 336 tonnes by fiscal 2025 – particularly as new projects and project expansions come online, according to the Office of the Chief Economist’s March 2023 Resources and Energy Quarterly.

Among recent new projects, Calidus Resources’ 2.8-tonnes-per-annum Warrawoona gold project poured its first gold in May 2022, declaring commercial production in December. Red 5’s 5.5-tonnes-per-annum King of the Hills gold project also achieved first gold in June 2022, together with commercial production in December 2022.

Production at Newcrest’s Cadia mine rose to 20 tonnes in 2022, while AngloGold Ashanti produced 7.2 tonnes at its Sunrise Dam operation and 14 tonnes at its Tropicana operation.

The Australian Government’s official forecaster sees production continuing to ramp up for recently commenced projects, such as King of the Hills, Norseman and Warrawoona. Other new mines coming online include Bellevue Gold’s 5.7-tonnes-per-annum mine, which announced the start of mining at its Vanguard open pit in April 2023, while Newcrest and Greatland Gold’s five-tonnes-per-annum Havieron project is set for 2024.

Northern Star’s The Super Pit gold operation is also expected to expand from 2024, growing to 675,000 ounces by fiscal 2028.

Western Australia has remained the focus for gold exploration activity, accounting for 72 per cent of total spending in 2022. Despite this, lower exploration spending in Victoria and New South Wales led to a five per cent overall decline to $1.5 billion in 2022, the report said.

New projects

Western Australia–focused explorer Platina Resources plans to drill three key projects in 2023, comprising its Brimstone, Xanadu and Beete projects.

On 30 March, it announced the start of a maiden 5500-metre aircore drilling program at Brimstone, located 40 kilometres north-east of Kalgoorlie and 25 kilometres from the Kanowna Belle gold mine. Earlier, in February, Platina Resources said it had identified a major gold prospect, Hermes, at its Xanadu project located in the Ashburton Basin, with further drilling planned.

Also in Western Australia, lithium-focused Sayona Mining has highlighted the potential of its Pilbara gold tenements, which are seen as prospective for intrusion-related gold mineralisation, similar to the nearby Hemi gold discovery. The company is eyeing Hemi-style targets for further exploration activity.

In Queensland, the state’s largest new gold mine, Ravenswood, completed a $350-million expansion in April 2023. Located 130 kilometres south-west of Townsville, the mine is expected to produce more than 200,000 ounces of gold each year.

The mine is seen as a potential supplier of gold for the 2032 Brisbane Summer Olympics and Paralympics, with Queensland Minister for Resources the Hon. Scott Stewart MP praising its ‘gold medal’ performance in supporting the local economy.

In New South Wales, Regis Resources’ McPhillamys project received official approval in March 2023, with the company planning to produce up to two million tonnes of gold during its mine life. Located near Bathurst, the mine is expected to create nearly 600 construction jobs and 260 operational jobs, along with $500 million in capital investment and $65 million in royalties.

Newcrest takeover

Gold miners have also been involved in a number of merger and acquisition deals, led by US gold giant Newmont’s $29.4-billion bid for Australia’s Newcrest Mining.

On 14 April, Newcrest announced the two companies had entered into an exclusivity period, with Newmont given until 11 May to complete due diligence. This followed Newmont’s revised higher offer, comprising both cash and shares for the Melbourne-based miner.

The Newmont bid follows a wave of major gold deals internationally in recent years, including Barrick’s acquisition of Randgold in 2019, Newmont’s takeover of Goldcorp in the same year, and Agnico Eagle’s 2021 acquisition of Kirkland Lake.

Analysts point to the potential for more merger and acquisition activity, with the gold sector described as ‘the most fragmented sub-industry in mining’.

And with prices surging, particularly in Australian dollar terms, local miners see some especially golden times on the horizon. 

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