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Mining
Gold miners across the world are poised to bolster production by almost 5% as prices eclipse all time highs.
The LBMA’s close of day price climbed to US$2125/oz overnight, crossing US$2100/oz for the first time in history and ending years of pounding at a glass ceiling since previous highs were struck in August 2020.
It comes as miners look to ratchet up gold production despite concerns it has lost its lustre as an investment opportunity to Bitcoin and battery metals stocks.
Industry analysts Metals Focus say new output from mines currently under construction, expanding or restarting will lift global gold production from 3644t in 2023 to 3816t in 2025. That would smash record output seen in 2018 of 3656t.
Will a sudden lift in output to new records kill the Golden Goose before its egg hatches?
It’s important to remember that gold isn’t like the other girls.
Gold doesn’t follow much of the supply and demand logic when it comes to price movements surrounding industrial, bulk and battery metals like iron ore, aluminium, copper, lithium and nickel.
While consumption of gold in jewellery and electronics contribute to demand for the physical metal, the latter especially so, it is primarily a financial instrument.
For that reason gold is more sensitive to macroeconomics and geopolitics. Central banks have underpinned price support in recent years, especially non-Western actors like Turkiye, Russia and China concerned about their exposure to the US dollar.
The crisis in the Middle East and Ukraine have provided safe haven support as investors look to protect against any economic fallout from the wars.
Finally, gold’s production, marketing and refining is unusually diverse. There is no single dominant producer like Australia and Brazil’s role in iron ore or refiner like China in lithium and graphite.
That prevents outsized impacts on prices from oversupply, trade wars, sanctions or domestic economic woes.
Metals Focus says the largest contributor to the new gold rush will be North America, where IAMGold’s Cote mine will start producing early this year at a rate of 6-8tpa, ramping up to 13tpa (418,000oz).
Equinox Gold’s Greenstone mine, Artemis Gold’s Blackwater, Ascot Resources’ Premier Calibre’s Valentine and an expansion of Alamos Gold’s Island mine are expected to deliver 33t of additional output between them.
South America, notably via Gold Fields’ 13tpa Salares Norte in Chile, will contribute to 18% of additional output, with African production to provide 17% of the growth.
Shandong Gold’s Namdini mine in Ghana, picked up in its acquisition of ASX-listed Cardinal Resources, will deliver 9tpa for 15 years from the final quarter of 2024.
ASX-listed Chinese takeover target Tietto Minerals (ASX:TIE) is expected to deliver 5tpa once its Abujar mine rises to steady state production levels.
Oceania, including Australia, will be more moderate adding just 12% of new supply, including 4tpa from the Bellevue Gold (ASX:BGL) mine, which poured its first ounces late last year.
However, the massive Hemi gold mine owned by De Grey Mining (ASX:DEG) is expected to enter the market the year after Metals Focus’ forecasts with a major ramp up of the Super Pit in Kalgoorlie by Northern Star also due later this decade.
Importantly, Metals Focus expects new gold mines on the horizon to be lower in cost than deep and mined out legacy operations.
“The average reserve basis for the covered projects is 100t, while the average LOM stands at 13-years with the weighted average all-in sustaining cost (AISC) estimated at $772/oz,” its analysts said.
“This highlights that the new projects coming on-stream tend to have a long mine life and are cost competitive, making them resilient throughout gold price cycles.”
One may have expected the gold industry to race higher in response.
Not so, as a blow off lopped 0.56% off the ASX All Ords gold sub-index this morning, a day on from a more than 4% gain.
READ: Monsters of Rock: Record gold prices float all boats for Argonaut
That came amid a broader pall over commodity stocks thanks to a Two Sessions policy meeting in China that announced an ambitious 5% GDP growth target but failed to provide meaningful direction on stimulus measures to prop up the world’s second biggest economy.
Bulk Buys: Iron, or? What commodity wins from China’s 5% growth target?
Singapore iron ore prices fell 0.65% to US$113.70/t in morning trade, while Dalian futures fell 1.5%.
Arcadium Lithium (ASX:LTM) meanwhile fell over 11%, while Lynas (ASX:LYC) and IGO (ASX:IGO) were among the large cap losers.
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