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Mining
Famed gold bull Sean Russo, principal and managing director of financial advisory Noah’s Rule, says the “world is coming our way” amid near record prices for bullion.
He says fund management businesses are shifting into gold as other popular investment assets like fixed interest, with more generalists looking to the precious metal as an investment opportunity.
While gold is volatile, it has been a very strong investment over the past 20 or so years, with Russo telling delegates at the close of Vertical Event’s RIU Sydney Resources Roundup yesterday it has risen 10 times over in value since his son was born.
“The Aussie dollar gold price is up 10-fold in his life but my mate’s still tell me gold’s not relevant to the world economy,” he said.
“But they haven’t got an investment that’s matched that in that period of time, so it’s a pretty spectacular market.
“We’re at this level when they’re all starting to think about it. A mate the same age as me who’s been in fixed interest for 40 years, enjoying 40 years of interest rates falling has been told he’s the gold guy as well in his fund management business in the US.
“They realise they’re not having now 40 years of tailwinds in interest rates and they’re in need of something else.”
Russo warned gold remained expensive when it came to different commodities, particularly consumables like oil and gas, and he isn’t making a plea for investors to dump their eggs in one basket.
But crises are a fertile atmosphere for gold, a traditional monetary safe haven, and the current environment looks like a strong one for the yellow metal. And Russo believes it is free of the headwinds that normally pause gold like an abnormally strong US dollar or underperforming equities.
“Gold looks expensive, but gold is not expensive relative to lots of other things most other people invest in and of a lot of those things people invest in are starting to look challenged,” he said.
“And if they start to run out of that and come running to where we already are that’s pretty exciting.”
We checked out a few of the interesting stories from junior explorers and project developers on the conference’s final day at the Hyatt Regency.
Backed by Chinese gold, copper and lithium giant Zijin, Xanadu Mines owns the large Kharmagtai copper-gold resource in Mongolia’s Omnogovi province around 420km south east of Ulaanbaatar.
It may sound remote to Aussie investors. But vice president of exploration Andrew Stewart sung its praises on the final day of the RIU Sydney Resources Roundup at the Hyatt Regency yesterday.
With a major copper deficit on the horizon and a 12 year lead time for most new mines to get development, he noted the Oyu Tolgoi mine in Malaysia has turned from a discovery in the mid-2000s to one of the world’s largest copper producers at a rapid pace.
“That was an exploration in 2005 that went into commercial production in 2013, it is now the biggest underground mine in the world,” he said.
“That’s about the ability to find these projects and build them quickly because of the low ESG risk, this is a country with very few people, it’s got the water resources, it’s got the natural resources.
“It’s got the infrastructure, we’re surrounded by some very large coal mines, we’ve got the power, the rail, and that makes the development of projects easy.
“More importantly it’s a country that’s got a mining culture, mining represents 21% of Mongolia’s GDP, it needs the mining, it relies on the mining and needs it to be successful.
“10 years ago having a strategic position in Mongolia was almost a necessity for all major companies and that fell off a but, but the geology didn’t change.
“In the last 12 months we’ve seen BHP reenter Mongolia, we’ve seen Rio Tinto now take complete ownership of the Oyu Tolgoi deposit – that’s a $3.3b acquisition – and we’ve seen Zijin now partner with Xanadu to take the Kharmagtai project through the study phase and into construction.”
Kharmagtai contains 3Mt of copper and 8Moz of gold, intended to be mined in a single open cut pit.
A PFS is expected to set up XAM for a decision to mine in 2024 with production targeted from Q4 2027.
Unabashedly looking to follow another’s success is ASX-listed Brazilian explorer Latin Resources, which wants to follow the lead of nearby spodumene miner Sigma Lithium in the development of their Salinas project and Colina prospect, which contains a resource of 13.3Mt at 1.2% Li2O.
“They’re only 40km away in the state of Minas Gerais, and so there’s no shame in what we say that we’re really trying to emulate their success because they truly have achieved great things in a short period of development,” LRS CFO Mitch Thomas told delegates.
“They started out in 2013 with a resource of 13Mt, same as us, and we think we can follow their trajectory in terms of resource growth.
“Other key things I’d point out is … their construction was very quick at 14 months, their capex and opex are benchmarked very favourably.”
Thomas said Latin was using the same consultants in engineering and permitting to follow the same path.
He says the downstream investment in battery capacity in the USA, Canada and Western Europe would need greenfields lithium projects to be developed to support the growth of the EV industry.
“We think our project in Brazil has an important role to play,” Thomas said. “We think Brazil is in a very advantageous location so (we’re) happy to support that push.”
Buoyed by the rising gold price and terrific recent drill hits at Fortitude North, Matsa Resources executive chairman Paul Poli says its Lake Carey gold project has real potential to be over a million ounces “if not multi-million ounces”.
“Some wiser geologists than me are certainly likening it to the AngloGold Ashanti Sunrise Dam gold mine, and it’s certainly starting to have the hallmarks,” he told delegates yesterday.
“The complexity, the stockwork and vein work is certainly starting to look like that.
“We’ll continue drilling here for the next six months.”
Assays from a further five holes are due in the next week or so. “We can only dream what they might look like,” Poli mused.
Also boasting lithium prospects in Thailand, Poli said the rising gold price had boosted the metrics around restarting its mothballed Fortitude and Red October mines at Lake Carey, as well as the Devon JV with the Linden Gold Alliance.
Previous studies at a $2400/oz Australian dollar gold price suggested Fortitude could make $95m in free cash flow. Gold is now trading near record levels at over US$2000/oz and over $3000 Aussie.
“If we insert the current gold price of circa $3000/oz this project would make $200 million positive cash flow,” Poli said.
“It just needs a home for its ore and this is what we’re addressing.”
The high grade Devon joint venture would deliver around $70m of cash at current gold prices, well above the $40.5m at $2250/oz anticipated in previous studies.
$800 million capped Ioneer is one of the most advanced, if not the most advanced, lithium developers in the United States.
Its boss Bernard Rowe says the US is duty bound to support the development of new mines like its Rhyolite Ridge deposit in Nevada.
Its funding pathway is already secure with a $700 million loan commitment from the US Department of Energy as well as a US$490m equity investment due to be delivered by future project partner Sibanye-Stillwater, one of the world’s biggest mining companies.
Rowe says the US has a massive need to support projects like Rhyolite Ridge, which will produce 22,000tpa of lithium carbonate and 174,000tpa of boric acid for over 25 years and supply major carmakers Ford and Toyota.
China continues to dominate lithium mineral processing, something that is a major concern to a leading economy in the USA which wants to secure its transition from ICEs to electric vehicles.
“In terms of the US market, 5000t that’s all the US produces of lithium carbonate today and it consumes 100,000t,” Rowe said.
“But by the end of this decade it’s going to consume just under 1Mt. 1Mt consumed and 5000t produced.
“You would need a lot of Rhyolite Ridges in production to even produce a small percentage of that million tonnes and it’s only going to increase from there.
“It’s got to happen. They don’t have a choice, that’s my view. It has to happen.”
Rowe says there are no other deposits like its searlesite hosted Rhyolite Ridge project, where mineralisation extends well beyond its current resource footprint.
“In addition to 22,000t of lithium we’ll be producing 174,000t of boric acid which would make us the third largest boron producer in the world after the Turkish Government and Rio Tinto,” he said.
“We have reserves already drilled for 26 years of production and we have a resource that if it was converted to reserves, making that assumption, it would be enough for something like 60 years of production.
“This deposit now contains 3.4Mt of contained lithium carbonate. That would take around 150 years to mine that at 22,000t a year.
“So it’s a very large deposit.”
While capex and opex for a future feasibility study will be higher than those included in Ioneer’s last study in 2020, Rowe says higher lithium and boric acid prices will make a positive contribution to the project ahead of an investment decision.
A final environmental approval permit is expected to be delivered in around eight months.
At Stockhead, we tell it like it is. While Matsa Resources, Latin Resources and Ioneer are Stockhead advertisers, they did not sponsor this article.
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