Commodities | Sep 07 2006
By Greg Peel
You know there might be a problem when the country’s most troubled gold mine turns out to be its best producer. This came to light following the release of gold consultants Surbiton Associates recent production report.
Until the June quarter, the appropriately named Super Pit, jointly owned by Canada’s Barrick Gold and US Newmont (ASX:NEM) was Australia’s biggest producer. However, Surbiton reports mine production fell 12,000oz in the quarter to 164,000oz due to a 10-day maintenance shutdown.
This left Newcrest’s (NCM) Telfer mine to pick up the baton and knock off the Super Pit with 184,415oz. The irony here is that Telfer is arguably the most troubled and, to date, disappointing gold mine in the history of mankind. Production downgrades have become a broken record.
What it does suggest is the worst is probably over for Telfer, with several brokers at least hoping this is the case. Five out of nine brokers in the FN Arena database now rate Newcrest a Buy.
Nevertheless Australia ‘s total gold production fell to 251t in FY06, 15t or 5% lower than the FY05 figure. A rain-affected March quarter did nothing to help, but then sunny skies did not encourage any pick up again in the June quarter either.
The good news is that several new companies and new operations have joined the list of Australia ‘s gold producers. With a gold price having hit A$933/oz in May, Surbiton notes some of the “juniors” were encouraged to hurry things up into production. Some are tiny, but others are more substantial.
Most of the smaller mine activity is occurring around Kalgoorlie in Western Australia, with Avoca Resources (AVO), Barra Resources (BAR), Kalgoorlie-Boulder Resources (KAL), Ramelius Resources (RMS) and Reed Resources (RDR) all having poured or are about to pour their first gold.
Other debutants are Range Resources (RRS) and Tanami Gold (TAM) while Gleneagle Gold (GLN), Renison Consolidated Mines (RSN) and Haoma Mining (HAO) have all revived old operations.
Amongst the bigger miners, Bendigo Mining (BDG) has commenced production and hopes to produce 70,000-90,000oz in FY07.
The bad news is that all the juniors don’t add up to that much, and most of these have developed from old mines or old exploration areas. Surbiton points out “Completely new gold projects are thin on the ground, especially big ones”.
It is surprising that despite increased exploration expenditure for many other commodities in recent years, exploration for gold has barely changed since the production downturn in the late 90s. Surbiton warns “that is what is essential for the long term sustainability of the local industry”.