Riding high on the tailwinds of global geopolitical and economic uncertainty, Australia’s gold industry has emerged as a pillar of strength in the Australian resources sector’s recovery.

Rivalled only by the emerging tech-driven buzz around the developing lithium market, gold was the talk of the town at the latest installment of Kalgoorlie’s iconic Diggers & Dealers Mining Forum, and its new wave of players afforded rock star treatment from delegates.

From junior explorers and producers right through to the ever-developing leaders of a new generation of Australian gold, it’s clear the sector has breathed some life back into a resources sector in desperate need.

People are uncertain, keeping some of their wealth and balance sheets in precious metals as a result.

The irony of a prospering gold sector is that it typically coincides with periods of global instability and uncertainty as people look to lock away their wealth.

True to form, cash is flowing towards gold as a safe-haven investment and with the local dollar low, the industry could not be better placed to capitalise.

Investment in gold as a store of wealth has hardly ever been higher – figures from the World Gold Council show global demand for gold bars, coins and gold-backed exchange-traded funds hit a first-half record in the first six months of 2016.

Despite this, Perth Mint Chief Executive Officer and Gold Industry Group Chairperson Richard Hayes told National Mining Chronicle the commodity wasn’t as reactive to global events as it once had been.

“The problem is the world has become relatively used to catastrophes,” he said.

“If you look at what we’ve endured over the last two or three years – the Brexit, the situation in the Middle East and Syria, or in the South China Sea around the Spratly Islands, the massive flow of refugees into Europe, or the United States and the spectre of a Donald Trump presidency – any of those, if you go back 10 or 15 years, would have been enough to move the gold price by a couple of hundred dollars.

“You’re not seeing those moves currently with these sorts of events, but gold is still holding well above US$1300 ($1723) an ounce and there is a reason for that.

“It is because people are uncertain, there is fear and that element of uncertainty about what the future holds. People and institutions are keeping some of their wealth and balance sheets in precious metals as a result.”

Playing an omniscient role as the middle ground between industry and investors, Perth Mint has a unique perspective of Australia’s gold sector, and Mr Hayes said he believed while things were good for Australia’s gold miners at the moment, the challenges were only getting greater.

“Gold is becoming more difficult to mine,” he said.

"In other words the reserves are deeper, they’re more difficult to extract, the gradings are perhaps not as great as they were 20 or 30 years ago and there’s cost squeezes everywhere.

“Australia is an expensive place to do business notwithstanding the wonderful Australian gold price and margins are squeezed across the board.”

This may not be the message Australia’s current generation of gold producers would want to hear, but if the rhetoric coming out of some of the nation’s major and emerging gold producers is to be believed it’s one that is understood loud and clear.

From those producing 800,000 ounces to those targeting 150,000 ounces, a number of prominent ASX-listed Australian gold players are setting out strategic plans for the coming years in a bid to conquer their market share in a commodity where mining is only going to get more difficult.

National Mining Chronicle caught up with some of the shining lights of the sector at Diggers & Dealers to get some insight into their plans for the months and years ahead.

St Barbara

FY17 production guidance: 340,000-370,000 ounces

FY17 all-in sustaining cost guidance: $985-$1075 per ounce

Producing projects: Gwalia, Simberi (PNG)

The comeback kid of the Australian gold sector, St Barbara, is finally in the financial position to consider its gold portfolio options.

Efficient operation at Gwalia in WA’s Goldfields and drastic improvement at Simberi have driven the company’s turnaround after the disastrous Gold Ridge saga left it with $420 million of interest payable debt at the end of March 2015.

Having parted with Gold Ridge for just $100 and with debt clawed back to a more manageable level, St Barbara is back and cautiously exploring its options for growth moving forward.

“We’re now, after a few years where we didn’t have two pennies to pinch together, starting to look around; we want to look at growth, we want to diversify our production base, we want to do that in gold and preferably in Australia,” Chief Executive Officer Bob Vassie said.

“Just now we’re starting to turn our attention to looking at what’s around us, but knowing we have to be careful because last time we did it didn’t work out too well.”

In Gwalia, the historic project once operated by a young Herbert Hoover, St Barbara has one of the world’s deepest trucking mines and a cornerstone production asset.

Gwalia’s reserves are already 1800m below surface level, but St Barbara believes its best opportunities moving forward lie in adding to the project’s resources at depth.

The company recently drilled to 2200m and picked up the orebody once more. The pressing issues for the company at present are ventilation and ore transportation.

“It gets a lot better downstairs so we need to understand how we will mine that down below 1800m and match it with the stuff we’ve left behind up to surface. That’s where we’re really focusing now,” Mr Vassie said.

The future of Simberi is not quite as clear – a strategic review of St Barbara’s PNG assets, including Simberi and exploration projects on the nearby Tobar and Tatau islands, is underway.

St Barbara is considering divesting some or all of the assets, potential joint venture arrangements or continuing its ownership of these projects.

On the exploration side, a total of $18-22 million expenditure is forecast, with $10-12 million planned for Gwalia and $8-10 million to be split 70:30 between PNG and the Pinjin project at Yilgarn in WA.

Saracen Mineral Holdings

FY17 production guidance: 280,000 ounces

FY17 AISC guidance: $1250 per ounce

Producing projects: Thunderbox, Carosue Dam

“A fun fact about an iceberg is that 87.5 per cent of its mass is below the water line,” Saracen Managing Director Raleigh Finlayson told Diggers delegates in reference to its growth plans.

The statement, while a slight indictment on Mr Finlayson’s sense of fun, is an apt summary of Saracen’s plans to take its WA-focused production past 300,000 ounces – explore and explore hard.

Having brought Thunderbox to production ahead of time and budget earlier in 2016, Saracen has increased its exploration budget threefold to a record $42 million in FY2017, up from $14.3 million last financial year and with almost $40 million to be spent on existing operations.

The investment marks the beginning of Saracen’s five-year plan for growth, and if the iceberg analogy is to be believed, the implication is there are plenty more years to come.
“I suppose by showing a five-year plan we’re implying there’s a 35-year plan below the water level,” Mr Finlayson said.

“It might be a bold statement, but I suppose the key point here is the two key developments we’ve got in Carosue Dam and Thunderbox have only been discovered in the last 30 years, versus the peer average in the Goldfields of around 100 years.”

Drilling will initially target underground at Thunderbox Zone A and the nearby King of the Hills project acquired from St Barbara last year, as well as the Red October, Deep South and Karari areas at Carosue Dam.

Later in the year Saracen will target Carosue Dam’s Whirling Dervish and carry out greenfields exploration at its Lake Carey project, where major miners including AngloGold Ashanti and Gold Fields are in production.

“This is without doubt one of the hottest exploration areas in Australia at the moment,” Mr Finlayson said of Lake Carey.

“It’s elephant country and there are elephant hunters out there. We’re not talking about trying to find some tusks, we’re trying to find the whole elephant. Saracen has committed $2.8 million to exploration at Lake Carey in FY2016.

Northern Star Resources

FY17 production guidance: 485,000-515,000 ounces

FY17 AISC guidance: $1000-$1050 per ounce

Producing projects: Jundee, Kundana, Kanowana Belle, Plutonic*, Paulsens (all WA)

Coming off a record financial year in which it produced 560,000 ounces of gold, Northern Star’s approach to the coming period is mapped in its three-year growth strategy and highlighted by its sale of the Plutonic Gold Mine to Canadian interests.

“The decision to sell Plutonic fits our logic of maximising financial returns, not headline production numbers,” then CEO Bill Beament said.

Parting with Plutonic has lowered Northern Stars’ production profile for 2017, but also brought down its cost guidance.

The company’s consolidated portfolio now comprises four concentrated production centres – Jundee, Kalgoorlie, Central Tanami and Paulsens – and Mr Beament believes these areas have the potential to drive production close to one million ounces per annum in the future.

Mr Beament said it was getting harder to discover greenfields gold projects, meaning there was greater value in brownfields.

“Exploration is becoming more focused around mines – we’re seeing that every day,” he said.

“That’s due to a lack of greenfields discoveries over the last 15 years.

“Production centres of scale – and when I talk about scale I mean 200,000 ounce-a-year operations, which we have quite a few of – are going to become much more valuable.”

Northern Star will part with $130 million of investing capital over the financial year, with $60 million to be used on targeted drilling to bring more resources into mine plans and convert discoveries to reserves.

The remaining $70 million will be expansion capital geared at bringing future deposits on line and boosting group production to 600,000 ounces from FY2018.

The company has also restructured its management, with Mr Beament taking on the role of Executive Chairman and Stuart Tonkin promoted to CEO.

Evolution Mining

FY17 production guidance: 800,000-860,000 ounces

FY17 AISC guidance: $900-$960 per ounce

Producing projects: Cowal, Mungari, Edna May, Cracow, Mt Rawdon, Mt Carlton, Pajingo*

In contrast to the stringent organic growth strategy out of rival Northern Star, Evolution Executive Director Jake Klein is a little more open to his company’s options.
“We want to remain focused on improving the quality of our portfolio,” he said.

“We would like to get to a point where each of our assets has at least an eight to 10-year mine life.

“The biggest opportunity for value creation in this regard is our existing asset base, but it also means all other options are on the table – acquisitions, divestments, M&A – and all of that through the lens of whether it will improve the quality of our portfolio.”

Evolution’s portfolio has already changed since the beginning of the financial year with the sale of Pajingo.

But Mr Klein said the company, which has grown substantially from its origins as a 50,000-ounce producer in 2011 on the back of well-timed acquisition, was not necessarily about to jump the gun in the M&A space.

“There are times when the most valuable thing you can do is wait for the right opportunity,” he said.

“In the face of relentless opportunity to do something, waiting patiently is often extremely difficult to do.

“We also recognise we work in an industry where standing still is not an option either, but if we are true with what we’ve been talking about we have to be very selective with our next move, as I think our company has been to date.”

Investment in exploration is expected to total $25-30 million in FY2017, with the majority to be spent at Mungari.

The bulk of the major capital budget of $110-140 million will be spent at Mungari, Mt Rawdon and Edna May.

Evolution has since acquired an economic interest in Glencore’s Ernest Henry gold mine in Queensland for $880 million, under which it will acquire 100 per cent of future gold production and 30 per cent of copper and silver from the life of mine area. Evolution will also take a 30 per cent stake in the mine.

*Plutonic and Pajingo were each sold by their respective owners following Diggers & Dealers.

Picture: Richard Hayes. The West Australian