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Mining
Suffering more bouts of concussion than a retired AFL player with a team of silks on retainer, gold crashed its bruised and by now probably fractured head into the US$2000/oz barrier again.
As threats of a new banking crisis renewed with a collapse in the value of First Republic Bank shares over in the States, bullion briefly looked ready for a breakout.
OANDA senior market analyst Ed Moya said investors viewed the banking issue as a largely contained one.
“Gold got its groove back and unless First Republic is miraculous saved and we don’t see any immediate stress on other midsized banks, the precious metal could make a run towards record highs,” he said.
“Gold turned negative as yields turned positive as investors realized the banking crisis was likely contained and the focus will shift back to inflation.”
What a day for not one, not two, not even three or four, but 11 (or maybe more, we lost count) large, mid-tier and junior gold miners to deliver their March quarter production results. Oy gevalt!
First up Northern Star (ASX:NST), owner of Kalgoorlie’s Super Pit, which did little to spur the newfound confidence of investors in the gold sector by revealing lower than expected production and a revision in all in sustaining cost guidance for FY2023 from $1630-1690/oz to $1730-1760/oz.
That came off the back of cost increases at its Pogo mine in Alaska, where the spring is still a bit loose, and the Super Pit, where mill downtime at both caused lower production in the March quarter.
NST sold 363,000oz at AISC of $1813/oz in the March quarter (equivalent to US$1240/oz and not far off the global average) and all in costs of $2426/oz.
Its Kalgoorlie hub delivered 191,031oz at $1781/oz, Yandal in WA’s northern Goldfields produced 125,072oz at $1627/oz and Pogo sold 46,978oz at US$1668/oz.
However, Northern Star has maintained its production guidance of 1.56-1.68Moz for FY23, with boss Stuart Tonkin saying the company, which has also increased spending on growth capex from $650m to $700m for the year with higher material movement at the Super Pit, is planning to deliver a strong fourth quarter.
There were some positive signs for gold bulls though, with Northern Star, which recently issued US$600 million of senior guaranteed notes in the US as it pumps its financial muscle for a planned production lift to 2Mozpa by 2026, adding hedges at “well over $3000/oz”.
That is, for those unaware, around recent Australian dollar records.
“On the ounce profile we have, the growth capex we’re delivering it’s still quite modest and it’s priced well, so 1.6Moz at nearly 2800 bucks an ounce,” Tonkin said about the NST hedge book.
“The additions … in the quarter were well over $3000 an ounce and if you comped our hedge book against every bank’s forecast, they’ve all got gold price coming off and we’ve got gold price going up.
“So something’s different there, but I’m confident that our policies work well for us today.
“We’ve still got over 75-80% of our production delivering into spot so it’s working well for us.”
A study on a more than $1 billion expansion of the Fimiston Mill at KCGM remains on track for this year.
Newcrest (ASX:NCM), unsurprisingly distracted by its $32 billion takeover offer from Newmont, will need to produce at a level unseen this year to hit its 2.1-2.4Moz guidance range for FY23, leaving around 550,000oz of slack to pick up through June.
Australia’s biggest gold miner delivered ~510,000oz of gold and 31,000t of copper at year-best all in sustaining costs of US$1012/oz and an all in sustaining cost margin of US$837/oz.
That included 133,468oz gold and 22,392t of copper at its flagship Cadia mine in New South Wales, where NCM’s production performance was its weakest this financial year, though it is tracking well ahead of 2022 at 444,924oz and 72,905t YTD against 373,936oz and 56,707t this time last year.
Higher copper prices and lower capex helped trim Cadia’s costs from US$32/oz to negative US$154/oz.
On the flipside, output and costs were steady at Telfer (85,452oz and a year-high 5076t copper) and Lihir (up from 154,143oz to 168,404oz QoQ) while Brucejack in Canada recovered from a December quarter blip when a fatality forced a temporary shutdown to deliver 70,160oz and Newcrest’s share of the Fruta Del Norte operation in South America rose from 38,764oz in December to 44,807oz in March.
The big focus around Newcrest is the Newmont bid. After initially knocking back the US gold giant twice, Newcrest is back in its crosshairs in the form of a 0.4 for 1 share offer that would also see Newcrest pay shareholders a special US$1.10 per share dividend.
Newmont is around two weeks through a four-week due diligence process due to end on May 11, when it will decide whether to make a formal offer. The deal would extend the Denver-based 6Mozpa fold behemoth’s lead over Canadian rival Barrick as the world’s top gold miner.
Joining the check-back-with-us-in-June crowd was $1.15 billion capped Ramelius Resources (ASX:RMS).
RMS produced 54,244oz at an all in sustaining cost of $1873/oz and tightened guidance to 240-250,000oz for FY23 with costs expected at the upper end of its $1750-1950/oz range. But it generated over $8m in free cash flow from its operations, a reversal on the December quarter’s ~$20m outflow.
June quarter production is expected to be strong, totalling 67,500-77,500oz at $1700-1800/oz as more high grade Penny ore is delivered to the Mt Magnet mill.
One of the big handbrakes has been a delayed approval to get its contractors’ quad road trains hauling the high grade 10g/t plus dirt from Penny to the processing plant, which has left its rich, glorious gold rush style ore sitting in stockpiles.
Dealing with two local shires and new staff, the dawdling approval process is expected to be completed by May 10, with stockpiles along with fresh ore to be drained by the end of June, a bureaucratic jumble that audibly frustrated Ramelius big dog Mark Zeptner on a conference call today.
Meanwhile, the MD believes the gold investment market is turning a corner on a horror 2022. Up 40% year to date, RMS has seen prices for its underlying commodity run hard, signing contracts on hedges as high as $3200/oz, well above recent Aussie dollar records.
“2022 was a pretty ordinary year for gold, everything else seemed to be more popular. But it comes and goes quickly, but at the moment it’s certainly a better place to be,” he said.
“And for the gold price to be around $3000, there’s been a bit of catch up on the gold price as compared to cost increases that we’ve all seen.
“So there’s probably a bit of evening out where margins have stabilised and obviously in the case of Ramelius with our lowering cost profile actually started to expand again, which is something we’re looking forward to.”
However, CFO Tim Manners says cost increases related to labour shortages are going to take some time to come back down, but that the industry was in a better place than 12-18 months ago.
“It’s an area that we have to be very mindful of and closely watch because it does drive probably 60% of our underlying costs, our people and the ancillary costs that flow from people as well,” he said.
Ramelius has hit acceptances of ~39% for its all scrip bid for Breaker Resources (ASX:BRB), which will go unconditional if it reaches 50.1% voting power by the offer’s close on May 8.
The 1 for 2.82 deal, delivering an implied premium of over 75% thanks to a recent run in RMS’ share price, was declared best and final on April 21.
Zeptner said the offer was “progressing well”, saying he hoped to generate further momentum once the 50.1% mark was reached.
The project will deliver more than 1Moz of additional resources into the RMS portfolio, bolstering the scale of a new hub the gold miner plans to develop east of Kalgoorlie in concert with the Rebecca project it acquired in its 2021 acquisition of Apollo Consolidated.
Jim Beyer’s words, not ours. Regis Resources (ASX:RRL) failed to hit the mark in March, selling 105,200oz at a hedge hit average realised price of $2477/oz.
It continues to have 145,000oz in the book as of March 31 at a frighteningly low price of $1571/oz.
That compared to production across its Duketon and Tropicana gold mines of 103,700oz at all in sustaining costs of $1827/oz, including 76,500oz at $1919/oz at the 100% owned Duketon and 27,200oz at $1458/oz for its 30% stake in AngloGold Ashanti’s (ASX:AGG) Tropicana gold mine.
Regis, which has $204m in the bank and generated $99m in operating cash in the March quarter despite a hedge loss of $29m, has already delivered much of the bad news, updating its guidance to 450-470,000oz at $1795-1845/oz on April 17.
“Whilst the March quarter production was below expectation, we still continued to deliver solid operating cash flows and progress our long term plans,” Beyer said.
“The June quarter will see the Company’s operations commence the transition from the capital intensive investment phase of the last two years, where ~$350M has been invested into the existing operations and enter a cash building phase as commercial production is expected to be declared at both Garden Well South underground and Havana open pit.”
Regis is also well-placed to move toward an investment decision on its long-stalled McPhillamy’s mine in New South Wales, where it recently received Independent Planning Commission approval.
Basically always mentioned in the same breath as Regis, the shiny new toy of its former boss Mark Clark, Capricorn Metals (ASX:CMM), says it remains on track to hit the mid-point of guidance at its Karlawinda gold mine of 115,000-125,000oz and lower end of cost guidance of $1160-1260/oz.
Its Q3 production included 30,841oz at $1252/oz, underpinning a record $46.9m in cashflow and bolstering cash on hand from $91.7m to $119.5m.
We’re not even close to done.
Resolute Mining (ASX:RSG) shares lifted around 1.7% after announcing a sixth consecutive quarter of increased production, with 92,259oz of gold poured at AISC of US$1453/oz from its Syama and Mako mines, down 6% on the December quarter.
That compared to 88,151oz of gold sold at a price of US$1890/oz compared to 93,326oz at US$1817/oz in December, with the West African gold miner generating $16.2m of cash outside debt, interest and working capital payments.
Over in WA Red 5 (ASX:RED) delivered record gold production of 17,550oz in March, with quarterly output of 40,867oz coming in at an AISC of $2055/oz at the King of the Hills gold mine near Leonora.
Red 5 plans to deliver 90-105,000oz for the second half of the financial year at AISC of $1750-1950/oz, implying a big ramp up in production through the June quarter.
RED produced 36,260oz in the December quarter. It has $23.4m in the bank after making a $14.7m loan repayment in March.
Nearby, St Barbara (ASX:SBM) held its wake for its ownership of the historic Gwalia gold mine, facing questions on whether its decision to shift the embattled gold miner’s flagship asset can help revive their investment.
SBM, which hit an all time high of $5 in mid-2018 but was today trading for just 60c, generated just $4m in cash from the once high-flying Leonora operations in the March quarter.
It will shift Leonora for a deal valued at $600 million to Genesis Minerals (ASX:GMD), whose high profile boss Raleigh Finlayson has fought tooth and nail to secure the asset to combine with his company’s earlier stage Ulysses gold project and Dacian Gold’s (ASX:DCN) Mt Morgans project.
Rather than the merger promised by the companies late last year, Genesis will make off with Gwalia while SBM will take a stake in the Finlayson led goldie and make do with the Atlantic and Simberi operations in Canada and PNG.
SBM produced 58,567oz in the March quarter at AISC of $2553/oz.
But Leonora came in at 30,942oz at $2809/oz, with cost guidance for Leonora lifted to $2650-2750/oz this financial year and cost guidance for SBM lifted to $2500-2650/oz on total production of 240,000-265,000oz for FY23.
“As previously announced, Leonora had another disappointing quarter which has resulted in production and cash generation being below our expectations,” MD Dan Lougher said.
“Despite the lower production, the cost and productivity improvement initiatives implemented over the last two quarters are starting to deliver tangible benefits. Pleasingly, Simberi and Atlantic generated substantial operational cash flows this quarter, offsetting the lower cash flow generation at Leonora.”
“The announcement of the sale of our Leonora assets to Genesis marks a pivotal point for St Barbara. Going forward, the company will focus its efforts on realising the inherent value of Atlantic, Simberi and its other non-Leonora assets, in a vehicle with a debt free balance sheet appropriately sized for success.
“I believe that the transaction in its current format delivers the best pathway forward for our shareholders by helping to unlock the market value of Atlantic and Simberi, while providing shareholders exposure to consolidation of the Leonora region through the Genesis equity distribution.”
Dacian meanwhile delivered 9197oz at $2452/oz at Mt Morgans ahead of the suspension of Mt Morgans, which has been placed on care and maintenance.
Genesis, which plans to begin underground mining at Ulysses in the September quarter, owns most of the still listed Dacian after closing its takeover offer on February 20.
Its purchase of SBM’s Leonora assets is expected to close around late June or early July, the key step in its plan to consolidate the historic Leonora gold field.
At the junior end of the market Ora Banda Mining (ASX:OBM) lifted production 4.7% on the September and December quarters at its Davyhurst gold operations to 12,310oz.
Its mined grade lifted 52% to 2.5g/t, with fourth quarter guidance updated to 14,000-15,000oz after hitting its highest production level for the year in March at 4,800oz.
The company plans to lift production from around the 50-60,000ozpa range to 100,000ozpa by FY25 with the development of the Riverina underground mine.
“This quarter has been one of significant transition for Ora Banda Mining as we committed to our high grade underground strategy via the approval to develop the Riverina Underground and strengthen our balance sheet by raising up to $44 million,” MD Luke Creagh said.
“For the first time OBM now has a funded and committed pathway to produce more than 100,000oz per annum in FY25 which is expected to substantially reduce unit costs and improve cash flow.
“The outcomes achieved this quarter have been delivered by a massive effort across the whole OBM team with one of the most pleasing achievements being the 50% increase in mined grade from the open pit.
“Looking forward, the Company expects to strengthen further with the start of the Riverina Underground mine in the June Quarter and continued improvements at the Missouri open pit because of a lower strip ratio which will reduce costs and increase ore volumes.”
Also reporting were Calidus (ASX:CAI), which as previously announced to the market lifted gold production 21% in the quarter to 15,187oz at $2093/oz, leaving guidance for the second half unchanged at 31,000-36,000oz at $2000-2250/oz, and obscure Kalgoorlie gold miners Tribune Resources (ASX:TBR) and Rand Mining (ASX:RND), Anton Billis’ conjoined twins who own 49% of Evolution Mining’s (ASX:EVN) EKJV.
At Stockhead, we tell it like it is. While Ora Banda Mining is a Stockhead advertiser, it did not sponsor this article.</em
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