Earlier this year the Australian gold price tipped over the $2000 mark for the first time in its history, signifying a growing sense of con dence in the commodity.

Off the back of this news alone, the future is looking exceptionally bright for the industry in Australia, but unfortunately this veil of con dence might be masking a much more widespread problem of longevity.

Around the same time the stock markets were propelling gold up the price charts, analysts were predicting Australia would lose its longstanding position as the second-largest gold producer in the world.

One such analyst was S&P Global Market Intelligence Research Analyst Christopher Galbraith, who said Australia would slip down the gold producer rankings by 2022 despite a high number of mines being commissioned in the country every year.

“From a production and exploration perspective Australia has quite a strong gold industry,” he said. “But a number of the country’s mines are running out of gold and nearing their end of life.

“While Australia has among the highest number of new mines opening, those newer operations are not large enough to replace the dwindling production from those older sources.

“The only way to prevent that eventual drop is to acquire or develop projects that will replace the falling production.”

IBISWorld Senior Industry Analyst James Aravanis predicted a similar scenario and felt the result of the fall would start becoming apparent in around five years.

He said current estimates would see Australia’s gold output drop from 324 tonnes in 2018-19 to 255 tonnes in 2023-24.

In an attempt to reduce the impact of this drop, Mr Aravanis said companies could seek to expand reserves by enacting efficiency strategies at their existing mines.

“In many cases, gold miners know where the gold is but are unable to engineer a way of extracting it for a profit,” he said. “Efficiency improvements could extend the lives of operating mines.

“Companies can also invest in green eld exploration. However, the benefit of new discoveries may be limited, given it can take years to develop a mineral discovery into an operating mine.”

The Minerals Research Institute of Western Australia (MRIWA) has been working with the Commonwealth Scientific and Industrial Research Organisation (CSIRO) on a program called Widening the search space to address this problem.

This is a 10-year research and development program that has mapped key areas in Western Australia’s eastern gold elds to improve understanding of the larger mineral systems gold deposits are found in.

“Gold mining in Australia and globally has focused on jurisdictions with known rich endowments of metal,” MRIWA Chief Executive Officer Nicole Roocke said. “As these mature provinces are exploited and their resources run out, it is important to explore new models of mineralisation and open up unexplored regions.

“On average, the delay between mineral discovery and development of new mines is 13 years, so projects like Widening the search space are critical.”

In response to the commentary surrounding the predicted drop in Australian gold production, Ms Roocke said WA, Australia’s largest gold-producing state, had struggled to make a tier-one gold discovery since the Tropicana deposit in 2005.

“Assuming a business-as-usual scenario, Australian gold production is forecast to fall by half over the next 40 years based on the 40-Year Outlook for Gold Production by Richard Schodde,” Ms Roocke said.

“Exploration success will play a major role in preventing this and averting the drop in production.

“Continued investment in direct exploration is needed though there is also a need to invest in research to improve exploration performance.”

Building on the work it is conducting with the CSIRO, the MRIWA is working with research and industry partners in the Paterson region of northern Australia in the hope of discovering quality new projects.

“In addition, the MRIWA is working with the gold sector to invest in research which seeks to enable safer, more efficient mines,” Ms Roocke said. “This includes research to reduce the cost and increase the safety of underground developments and to reduce the use of cyanide to enable safer and more environmentally friendly processing methods.”

Gruyere’s slice of the wheel

Bucking the trend for the time it takes to start producing on a new discovery, Gold Road Resources’ and Gold Fields’ 50:50-owned Gruyere gold mine poured its first gold bar at the end of June 2019, less than six years after it was discovered in October 2013.

The mine is expected to be in production for about 12 years and will be the head of a triumvirate of new projects expected to come online in the next couple of years that will boost short-term growth of production in Australia.

This is according to the Department of Industry, Innovation and Science’s Resources and Energy Quarterly June 2019 report, which estimated gold production in Australia would peak at 339 tonnes in 2019-20 before falling to 332 tonnes in 2020-21.

Capricorn Metals’ Kalawinda gold project – expected to be commissioned in 2020 – and Regis Resources’ Rosemont mine, expected to commence production in 2020, are the two other new mines set to play a part in the short-term growth.

In a statement addressing the first gold pour at Gruyere, Gold Road Managing Director and CEO Duncan Gibbs said it was a tremendous achievement but there was much still to do to enhance the new mine and surrounding area, highlighting the need for further exploration.

“Our work is far from done,” he said. “We remain committed to exploring the highly prospective Yamarna Greenstone Belt to unlock the potential through the discovery of more resource ounces for Gruyere and new discoveries that could be developed as standalone gold mines.”

Mr Aravanis said gold mining in Australia was expected to thrive in the long term. “However, this is dependent on the industry conducting a sufficient degree of exploration,” he said.

Bright future?

However, one man’s downturn is another man’s opportunity, and Mr Aravanis said other mining sectors could bene t from a slump in the gold industry.

“Australia has vast untapped mineral resources that are yet to be discovered,” he said. “As gold mines close, the supply of highly skilled mining labour would likely rise for other mining industries.”

Mr Aravanis said it was also possible a decline in revenue could prompt some companies to merge in order to derive economies of scale to protect margins.

“In particular, large players are likely to acquire mid-cap players,” he said.

Mr Galbraith was con dent the industry in Australia had the potential in the long term to bounce back from a loss in production and said the mining industry as a whole might not see too many negative side effects.

“It is reasonable to expect some basic side effects – the country’s taxes from gold production will fall, while the depletion and closure of mines would lead to less employment in the gold sector,” he said.

“That being said, with that strong exploration sector I wouldn’t expect to see much drop in investment too soon. Exploration and capex should remain in line with global trends. Those depleting mines are near their ends of lives so would not expect to be getting as much capex investment as they are today. Certainly the grand scheme will be more complex and those losses could be mitigated by gains in other sectors (or other subsets of the mining sector) so a net loss isn’t guaranteed.”