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Cyclones slash Australian gold production in March quarter

3rd June 2024

By: Creamer Media Reporter

     

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Australian gold mine production fell to 70 t in the March quarter, from 77 t in the December quarter, as a series of cyclones moved inland, with heavy rain wreaking havoc on the country's main gold producing regions in Western Australia, Queensland and the Northern Territory.

“Gold production is dislocated almost every March quarter,” said Melbourne-based Surbiton Associates director Dr Sandra Close.

“In late-December 2023, cyclone Jasper flooded parts of Queensland. This was followed by cyclone Kirrily in late-January, Lincoln in mid-February and Megan in mid-March. In Western Australia, cyclone Lincoln returned, affecting gold production at the end of the quarter.”

At least 20 gold mining operations reported production problems owing to rain and flooding.

At Tropicana, which is 70% owned by AngloGold Ashanti and 30% by Regis Resources, 314 mm of rain fell in 72 hours in early March, severely disrupting operations.

“Wet weather makes haul roads dangerous and greasy. Wet ore ‘hangs up’ in ore bins, is difficult to crush and sticks to conveyor belts,” Close said. “In this quarter, some openpits were flooded and mining ceased. Also, at some underground mines, where the workings are accessed by decline from near the base of an existing openpit, it was impossible to haul ore to the treatment plants.”

Supplies of fuel oil and consumables were disrupted at some operations while other producers reported power outages, where high rainfall damaged power grids causing electricity supplies to fail.

“Local producers are enjoying record Australian gold prices, notwithstanding the recent lower production,” Close said. “There have been substantial price rises since the start of the year, with a record Australian spot price of A$3 756/oz reached in overnight trading on 13 April 2024.”

Operations reporting lower gold output, in many cases due to rain, included Tropicana, down 59 000 oz, Newmont's Tanami, down 46 000 oz and Gold Fields' St Ives, down 40 500 oz. However, most companies are maintaining production forecasts for calendar 2024, as they expect largely to make up production losses over the remainder of the year.

“Investors should remember that the effect of rain, while serious, is just a short-term problem,” Close said. “Yes, there are additional costs in repairing haul roads and pumping water out of pits but the gold is still there and has not been washed away. Its production has simply been delayed.” 

Among the producers that increased output was Newmont's Cadia, in New South Wales, up 25 000 oz compared with the previous quarter. Another bright spot was Bellevue, in Western Australia, where production increased by almost 22 000 oz as the new mine ramps up to full production of around 200 000 oz/y.

“The March quarter saw increased takeover activity,” Close said. “Increased gold prices often highlight the potential for merger and acquisition opportunities.”  

Westgold Resources and Toronto-based Karora Resources have agreed to ‘merge’ to form an unhedged 400 000 oz/y producer. The enlarged Westgold will have a market capitalisation of about A$2.2-billion. The takeover is worth about A$6.60 a Karora share, or A$1.23-billion on a fully diluted equity basis.

However, this move could derail confidential merger and acquisition talks that Westgold and Ramelius Resources have been having since late last year.

In February, Red 5 said it would take over Silver Lake Resources by offering 3.434 Red 5 shares for each Silver Lake share. The deal is reportedly worth A$2.2-billion and would result in an enlarged company with the Red 5 name, producing around 445 000 oz of gold in 2024 plus around 1 400 t/y of copper.

Edited by Creamer Media Reporter

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