Managing Director, MinEx Consulting Adjunct Professor ...minexconsulting.com/wp-content/uploads/2019/12/... · Adjunct Professor, Centre for Exploration Targeting , UWA 28th November

Strategic advice on mineral economics & exploration

Managing Director, MinEx Consulting

Adjunct Professor, Centre for Exploration Targeting , UWA

28th November 2019

Essentially a modified version of my recent presentation to the

NewGenGold Conference in Perth

Essentially a modified version of my recent presentation to the

NewGenGold Conference in Perth


– Australia vs Canada

– How much found?

– Where are the “hot spots”?

- Are we running out of “good” deposits?

– What’s the average depth by Region?

– Majors versus Juniors

–Tiers 1, 2 & 3

– $/oz costs are rising over time

– i.e. Is the industry sustainable?

2

Strategic advice on mineral economics & exploration 3


$0

$2

$4

$6

$8

$10

$12

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Rest of World

FSU + E Europe

China

Western Europe

Africa

Pacific / SE Asia

Latin America

USA

Canada

Australia

June 2019 US$ Billion

Sources: MinEx Consulting estimates, based on data from ABS, NRCan, MNR (China), Tilton (1988),Wallace (1992,93) and S&P © October 2019

Expenditures down by 65%Expenditures are extremely cyclicalExpenditures are extremely cyclical

69% 75%

4

2012$11.8b

2019$4.4b

2002$1.3b

1997$5.0b

1988$5.1b

1993$1.6b

1975$0.4b

2016$4.2b

2008$6.2b


$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

2000 2005 2010 2015 2020

June 2019 US$ Billion

Sources: ABS, NRCan, MNR (China) and S&P (for USA)

Aust+Can+USA+China account for half of all gold exploration

in the World

Aust+Can+USA+China account for half of all gold exploration

in the World

5

China

Canada

Australia

USA

Apart from Australia, expenditures in 2019 are

substantially down from their peak in 2012

Apart from Australia, expenditures in 2019 are

substantially down from their peak in 2012

down 22%

down 66% (from 2011)

down 63%

down 78%


June 2019 A$ Million

Spend on gold & base metals is approaching

an all-time high

Spend on gold & base metals is approaching

an all-time high

Note: Annualised spend is 4x higher than quarterly spend

6



0

20

40

60

80

100

1950 1960 1970 1980 1990 2000 2010 2020

Moderate (0.1-1 Moz)

Major (1-6 Moz)

Giant (>6 Moz)

Number of Deposits

Source: MinEx Consulting © October 2019Note: Discoveries are for Primary gold deposits >0.1 Moz Au

Excludes satellite deposits within existing campsData from 2009 onwards have been adjusted for unreported discoveries

8

Over the last 2 decades industry has been finding 35 to 45

significant deposits per year

Over the last 2 decades industry has been finding 35 to 45

significant deposits per year

Drop-off in recent years is artifact of

the how companies report discoveries

Drop-off in recent years is artifact of

the how companies report discoveries


0

20

40

60

80

100

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported


Major (1-6 Moz)

Giant (>6 Moz)

Number of Deposits



Adjustment for unreported discoveries


9

Over the last decade , only 5% of the significant deposits found were >6 Moz

Over the last decade , only 5% of the significant deposits found were >6 Moz


0

50

100

150

200

250

300

1950 1960 1970 1980 1990 2000 2010 2020


Major (1-6 Moz)

Giant (>6 Moz)

Moz of Gold

Source: MinEx Consulting © October 2019Note: Excludes by-product gold associated with base metal and other discoveriesExcludes satellite deposits within existing campsData from 2008 onwards have been adjusted for unreported discoveries

10

Over the last decade, 32% of the ounces found were in deposits >6 Moz



0

50

100

150

200

250

300

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported


Major (1-6 Moz)

Giant (>6 Moz)

Moz of Gold

Source: MinEx Consulting © October 2019Note: Excludes by-product gold associated with base metal and other discoveriesExcludes satellite deposits within existing campsData from 2008 onwards have been adjusted for unreported discoveries

11







0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

By-Product Gold

Primary Gold

Moz of Gold

Source: MinEx Consulting © October 2019Note: Excludes satellite deposits within existing campsData from 2008 onwards includes estimates for unreported discoveries

13


0%

20%

40%

60%

80%

100%

120%

140%

0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Est UnreportedBy-Product GoldPrimary Gold% By-Product (3 Yr Rolling Avg)

Moz of Gold


% By-Product Gold

On average 23% of all gold found is a by-product of

exploration for other metals

On average 23% of all gold found is a by-product of

exploration for other metals

14


0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

By-Product Credits

Primary Gold

15

Moz-eq of Gold

Source: MinEx Consulting © October 2019Note: Excludes by-product gold associated with base metal and other discoveriesIncludes gold –equivalent value of base metal and other credits associated with the primary gold depositData from 2008 onwards have been adjusted for unreported discoveries

… And gold deposits can have their own by-product credits (of silver and copper) … And gold deposits can have their own by-product credits (of silver and copper)

… these are worth 9% of the primary gold found



0

20

40

60

80

100

1950 1960 1970 1980 1990 2000 2010 2020

FSU + China + E Europe

Rest of the World

Western Europe

Pacific / SE Asia

Africa

Latin America

Australia

USA

Canada

Note: Includes an adjustment for unreported discoveries in recent years

Number

Source: MinEx Consulting © October 2019

17


0%

20%

40%

60%

80%

100%

1950 1960 1970 1980 1990 2000 2010 2020


Rest of the World

Western Europe

Pacific / SE Asia

Africa

Latin America

Australia

USA

Canada

Percentage of deposits found


In the last decade, there have several

discoveries in Australia

In the last decade, there have several

discoveries in Australia

Note: Includes an adjustment for unreported discoveries in recent years

18


0

50

100

150

200

250

300

1950 1960 1970 1980 1990 2000 2010 2020


Rest of the World

Western Europe

Pacific / SE Asia

Africa

Latin America

Australia

USA

Canada

Note: Includes an adjustment for unreported discoveries in recent yearsExcludes by-product credits

Moz of Gold


19


0%

20%

40%

60%

80%

100%

1950 1960 1970 1980 1990 2000 2010 2020


Rest of the World

Western Europe

Pacific / SE Asia

Africa

Latin America

Australia

USA

Canada

Note: Includes an adjustment for unreported discoveries in recent yearsExcludes by-product credits

Percentage of ounces found


In the last decade, has seen large

discoveries in Canada

In the last decade, has seen large

discoveries in Canada

20


Primary gold deposits found : 1950-2017

0%

20%

40%

60%

80%

100%

1950 1960 1970 1980 1990 2000 2010 2020

FSU + China + EE

Western Europe

Rest of the World

Africa

Pacific / SE Asia

Latin America

Australia

USA

Canada

Percentage of Total

Rise of China and the return of Africa

Rise of China and the return of Africa

Big jump in Canada in 2005 due to discovery

of 106 Moz at KSM

Big jump in Canada in 2005 due to discovery

of 106 Moz at KSM

From 1960 onwards several big discoveries were made in

USA and Canada

From 1960 onwards several big discoveries were made in

USA and Canada

… followed by Australia in

1980s & 90s

… followed by Australia in

1980s & 90s

Exploration efforts in Russia suspended following the collapse

of the Soviet Union in 1991

Exploration efforts in Russia suspended following the collapse

of the Soviet Union in 1991

The relative importance of each Region changes over time

The relative importance of each Region changes over time

… is driven by geological maturity, technology,infrastructure and Country Risk

21


Strategic focus on gold exploration and production in USSR

Strategic focus on gold exploration and production in USSR

In recent years very few primary gold discoveries in

Latin Am and SE Asia

In recent years very few primary gold discoveries in

Latin Am and SE Asia


Alaska/Yukon Northern Ontario

Latin America

Ten current “Hot Spots”Ten current “Hot Spots”

West Africa

China

WesternAustralia

SW USA/ Mexico

Turkey / Caparthian Belt

Central /NE Africa

Source: MinEx Consulting © October 2019Note: Based on deposits containing >0.1 Moz of gold

N = 377

Far East Russia

22


• Cote - Discovered in 2010 by Trelawney Mining & Exploration in Ontario. Current Resource is 468 Mt @ 0.82 g/t Au = 12.4 Moz

• Red Hill/Goldrush - Discovered in 2011 by Barrick next to its existing operation in Nevada. Current Resource is 67 Mt @ 7.0 g/t Au = 14.9 Moz

• Haiyu - Discovered in 2011 by Laizhou Ruihai in Shandong Province in China. Reported to contain 67 Mt @ 7.0 g/t = 15.1 Moz. Is under 1250m of cover

• Xiling - Discovered in 2016 by Shandong Gold Mining in Shandong Province in China. Contains 85 Mt @ 4.5 g/t = 12.3 Moz. Underground deposit

• Swan – Discovered by Kirkland Lake in 2016 at its existing Fosterville operation in Victoria. Contains 2.1 Mt @ 45 g/t = 3.0 Moz and growing

• Cascabel – Cu/Au deposit in Ecuador discovered by SolGold in 2013. Contains 2950 Mt @ 0.37% Cu + 0.25 g/t Au = 10.0 Mt Cu + 23.2 Moz Au

• Hu’u – Cu/Au deposit in Indonesia discovered by Vale in 2015. Is under 400m of cover. Unofficial resource is 1700 Mt @ 0.90% Cu + 0.52 g/t Au + 3.6 /t Ag = 15.3 Mt Cu + 28.4 Moz Au

23



Source: Matt Bruce September 2019

Coverage halvedbetween 2011 and 2017


25


Source: Matt Bruce September 2019



Little Sandy Desert[Potash] South Mt Isa

[Base Metals]

Western Victoria [Cu and Au]

Paterson Range [Cu-Au]

26


Victorian Govt is putting 4 Exploration Blocks (surrounding the FostervilleGold mine) up for tender.

Total Area = 1567 km2

Tender briefing 13th December 2019

Tenders close 31 Jan 2020

For more info go to …

https://earthresources.vic.gov.au/projects/north-central-victorian-goldfields-ground-release/for-explorers

27



1

10

100

1000

1950 1960 1970 1980 1990 2000 2010 2020

N = 1085

Moz

Average size of deposits >1 Moz3 year rolling average

1950-59: 15.3 Moz1960-69: 6.3 Moz1970-79: 7.2 Moz1980-89: 4.8 Moz1990-99: 4.9 Moz2000-09: 4.6 Moz2010-18: 3.2 Moz

All primary gold discoveries >1 Moz in the World: 1950-2018

Note: Excludes deposits where gold is a by-product. No adjustment made for growth in recent discoveries Source: MinEx Consulting © October 2019

Average size has declined in recent years

… though this may be simply a function of maturity

Average size has declined in recent years

… though this may be simply a function of maturity

29


0.1

1

10

100

1950 1960 1970 1980 1990 2000 2010 2020

Note: Excludes deposits where gold is a by-product.Also excludes artisanal mines and retreatment of waste dumps

g/t Au

3.09 g/t in 2017

Average grade of gold mined in the World

Average grade of gold mined in USA + Canada + Australia + South Africa

5.17 g/t in 1985

1.64 g/t in 2017

Average grade of gold discovered in the World(3-Year rolling average for discoveries >1 Moz)

1.60 g/t in 1985

12.49 g/t in 1968

Average ore grade for all primary gold discoveries >1 Moz in the World versus average head grade of ore mined

Sources: MinEx Consulting © October 2019Mudd (2010) for production data 1950-1990MinEx Consulting for production data 1990-2017

30

0.78 g/t in 2007


0.1

1

10

100

1950 1960 1970 1980 1990 2000 2010 2020

ALL

Open Pit

Underground

Note: Excludes deposits where gold is a by-product.Also excludes artisanal mines and retreatment of waste dumps

# The dip in underground grades in 1996-98 is associated with the discovery of the giant Ridgeway and Cadia East deposits (239 Mt @ 0.94 g/t Au and 2990 Mt @ 0.39 g/t Au respectively)

g/t Au

3.09 g/t

1.23 g/t

6.72 g/t

#

The apparent increase in grade is due to a change in the ratio between (low grade)

open pit deposits and (higher grade) underground deposits

The apparent increase in grade is due to a change in the ratio between (low grade)

open pit deposits and (higher grade) underground deposits


31



-200

0

200

400

600

800

1000

1200

1400

1900 1920 1940 1960 1980 2000 2020

World (excl Sth Africa) : Greenfield World (excl Sth Africa) : Brownfield

South Africa : Greenfield South Africa : Brownfield

Depth of Cover (Metres)

Note: Primary gold deposits > 0.1 Moz. Bubble size refers to Moz of pre-mined ResourceExcludes satellite deposits within existing Camps.

Discovery Year

1900


… even so, most of the gold discoveries are still being made under shallow cover

… even so, most of the gold discoveries are still being made under shallow cover

The depth of cover is gradually increasing

over time

The depth of cover is gradually increasing

over time

… the exceptions are Brownfield discoveries,

especially in the Witwatersrand in Sth Africa

… the exceptions are Brownfield discoveries,

especially in the Witwatersrand in Sth Africa

Average depth over last decade (2009-18)

= 66 metres

33


415

375

299

118109

6362

242

7

41

330

921620

50

14

0

100

200

300

400

500

Brownfield

Greenfield

World Average

Latin Am

Africa (excl Sth Africa)

AustraliaWestern Europe

Canada USAPacificSE Asia

Rest of World

Metres

Note: Based on 290 Primary gold deposits with reported depths and > 0.1 moz AuExcludes satellite deposits within existing Camps

FSU+EE+China

1388


Depth of cover varies by location and target typeDepth of cover varies by location and target type

NA

34

World Average (GR+BF)is 66 metres

World Average (GR+BF)is 66 metres


0

100

200

300

400

500

0% 25% 50% 75% 100%0

100

200

300

400

500

0% 25% 50% 75% 100%

89%

93%

94%

96%

96%

51% of all discoveries

(by number) outcrop


(by number) outcrop


(by Moz) outcrop


(by Moz) outcrop

78%

84%

86%

88%

89%

Average depth is 66 metres




Depth of Cover (Metres) Depth of Cover (Metres)

Source: MinEx Consulting © October 2019Note: Analysis based on 290 deposits with known depth data and >0.1 Moz.

Includes both Greenfield and Brownfield discoveries

35



0

20

40

60

80

100

1975 1985 1995 2005 2015

Est Unreported

Other

State Owned Co

Prospectors

Junior Companies

Moderate Producers

Major Companies

Number


Moderate+Major+Giant primary gold discoveries in Western World: 1975-2018

Note: Figures are adjusted for shared discoveriesExcludes satellite deposits within existing Camps

In recent years Junior Companies have found

most of the deposits

In recent years Junior Companies have found

most of the deposits

37


0%

20%

40%

60%

80%

100%

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Other

State Owned Co

Prospectors

Junior Companies

Moderate Producers

Major Companies




Junior companies now account for 60-70% of all

discoveries (by number) in the Western World

Junior companies now account for 60-70% of all

discoveries (by number) in the Western World

38


0%

20%

40%

60%

80%

100%

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Other

State Owned Co

Prospectors

Junior Companies

Moderate Producers

Major Companies




Junior companies now account for 55-65% of all discoveries (by ounces) in

the Western World

Junior companies now account for 55-65% of all discoveries (by ounces) in

the Western World

39


0%

20%

40%

60%

80%

100%

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Other

State Owned Co

Prospectors

Junior Companies

Moderate Producers

Major Companies

Number




Junior companies now account for 50-60% of all discoveries (by value) in

the Western World

Junior companies now account for 50-60% of all discoveries (by value) in

the Western World

40


0%

20%

40%

60%

80%

100%

Spend Number Ounces Value

Other

State Owned Co

Prospectors

Junior Companies

Moderate Producers

Major Companies

41

Note: Figures are adjusted for shared discoveriesExcludes satellite deposits within existing CampsExploration expenditures are approximate only

39%

12%21%

45%

72%

54%

14%

8%

13%

5%

9%17%

7%

64% 62%

1%

10%1%

7%

5%

7%3%

<1%6%

4%2%


Over the last decade Juniors performed

better than the Majors

Over the last decade Juniors performed

better than the Majors



-$1

$0

$1

$2

$3

$4

$5

Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 Dec-18

2019 A$ Million pa

Note: Survey based on a sample of 360 junior exploration companies listed on the ASX between 1998-2019.“Net Other” includes production and other costs less interest income, mine revenue, asset salesGovernment Assistance and R&D tax credits.Quarterly spend data has been multiplied by 4x to produce an annualised spend rate.

Cash Reserves

Exploration & Development

Administration + Staff

Net Other

Source: MinEx Consulting © Nov 2019 based on Quarterly Reports to the ASX

During a downturn, “in-field” exploration & development

expenditures are cut the most

During a downturn, “in-field” exploration & development

expenditures are cut the most

Admin costs tend to be “fixed”

Admin costs tend to be “fixed”

Cash Reserves are approaching

historic lows

Cash Reserves are approaching

historic lows

exploration activity has collapsed

exploration activity has collapsed

43



0

2

4

6

8

10

12

1950 1960 1970 1980 1990 2000 2010 2020

Tier 2: Economic & Large

Tier 1: World Class

Number of Deposits


Note: Primary gold deposits only Caution: No adjustment made for unreported discoveries

N Tier 1 = 59

N Tier 2 = 177

45


$0

$5

$10

$15

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported Value

Unclassified

Tier 3

Tier 2

Tier 1

Caution: Values are indicative / approximate-onlyAssumes that the average value of a Tier1/Tier2/Tier3/Unclassified discovery is $2000m / $500m / $80m / $10m in 2013 Dollars Source: MinEx Consulting © October 2019

2019 US$ billion

Caution: Incomplete data in recent years

Tier 1 and 2 deposits account for 72% of the value created

Tier 1 and 2 deposits account for 72% of the value created

… but only account for only 10% (by number) of all significant deposits found

46



$0

$2

$4

$6

$8

$10

$12

$14

0

20

40

60

80

100

120

140

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Number of Discoveries

Expenditures (2019 US$b)

48

Number of Deposits

Primary Gold deposits only (>0.1 Moz) plus associated By-Product Credits : 1950-2018

2019 US$b




$0

$50

$100

$150

$200

$250

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Average Cost per Discovery (2019 US$m)

Note: Discoveries are for Primary gold deposits >0.1 Moz AuData from 2008 onwards have been adjusted for unreported discoveries

Weighted Average for 2000-09 = $75m


Estimated

Unit costs now running at ~$130m

per discovery

Unit costs now running at ~$130m

per discovery




49


$0

$2

$4

$6

$8

$10

$12

$14

0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

By-Product Credits

Primary Gold

Expenditures (2019 US$b)

50

Moz-eq of Gold

Source: MinEx Consulting © October 2019Note: Excludes by-product gold associated with base metal and other discoveriesIncludes gold –equivalent value of base metal and other credits associated with the primary gold depositData from 2008 onwards have been adjusted for unreported discoveries

Primary Gold deposits only plus associated By-Product Credits : 1950-2018

2019 US$b


$0

$20

$40

$60

$80

$100

$120

1950 1960 1970 1980 1990 2000 2010 2020

3 Year Rolling Average

2019 US$/oz-eq

Source: MinEx Consulting © October 2019Note Includes the value of by-product credits from other metals associated with the primary gold deposit

Data from 2008 onwards have been adjusted for unreported discoveries

Former Soviet Union + Eastern Europe + China

Western World

World

Estimate

$43

$37

$21

Unit discovery costs peaked in 2012-13

Unit discovery costs peaked in 2012-13

51


$0

$20

$40

$60

$80

$100

$120

1975 1985 1995 2005 2015

3 Year Rolling Average

2019 US$/oz-eq

Source: MinEx Consulting © October 2019Note Includes the value of by-product credits from other metals associated with the primary gold deposit

Data from 2008 onwards have been adjusted for unreported discoveries

Estimate

$37

$97

$14

$30 $28

$11

$27

$6

Costs rising by $8/oz per

decade

Costs rising by $8/oz per

decade

Costs are driven by a mix of cyclical and structural factors

Costs are driven by a mix of cyclical and structural factors

Cyclical factors include cost of drilling and geologists.Structural factors include target maturity, increased depth, remoteness and increased social costs

52

Weighted Average for 2000-09 = $27/ozWeighted Average for

1990-99 = $18/oz

Weighted Average for 2010-18 = $62/oz

Weighted Average for 1980-89 = $16/oz


$0

$2

$4

$6

$8

$10

$12

$14

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Est Value

Expenditures

53

2019 US$b



Over the last decade industry switched from value creation to value destruction

Over the last decade industry switched from value creation to value destruction

Period 2009-18: Value/Cost = 0.46Period 2009-18:

Value/Cost = 0.46

… increases to 0.64 if you include estimate for unreported discoveries


Region Explorn Spend (2019 $b)

Adjusted No of Discoveries

Adjusted Moz found Avg Size Moz-eq

Cost US$/oz-eq

Australia $5.9 9% 76 17% 153 2 155 14% 2.0 $38

Canada $12.5 19% 53 12% 152 3 155 14% 2.9 $81

USA $5.9 9% 19 4% 66 1 68 6% 3.6 $87

Latin America $15.6 23% 56 12% 103 16 119 11% 2.1 $132

Pacific/SE Asia $4.0 6% 6 1% 9 1 10 1% 1.6 $406

Africa $10.1 15% 152 32% 323 1 324 30% 2.1 $31

W Europe $1.6 2% 16 4% 20 6 26 2% 1.7 $60

FSU+EE+China $11.5 17% 65 14% 220 0 220 20% 3.4 $52

Rest of World $0.5 1% 12 3% 15 2 17 2% 1.4 $30

----- ------ ------ ------- ------ ------ ------- ------- ------- -------

TOTAL $67.5 100% 455 100% 1061 33 1094 100% 2.4 $62

Source: MinEx Consulting © November 2019

Africa & ROW had lowest discovery costs, PAC/SEA was highest Africa & ROW had lowest discovery costs, PAC/SEA was highest

Au BP Credits Moz-eq

Note:.Includes adjustment for unreported discoveries

54


Spend & performance by Region:

2009-2018

Region Exploration Spend (2019 $b)

No of Discoveries

Tier 1+2 Discoveries

Estimated Value(2015 $b)

Value / Spend

Australia $5.9 9% 76 17% 4 22% $5.4 17% 0.91

Canada $12.5 19% 53 12% 4 22% $5.4 17% 0.43

USA $5.9 9% 19 4% 1 6% $2.8 9% 0.48

Latin America $15.6 23% 56 12% 3 17% $3.1 10% 0.20

Pacific/SE Asia $4.0 6% 6 1% 0 0% $0.1 0% 0.03

Africa $10.1 15% 152 33% 3 17% $5.8 19% 0.57

W Europe $1.6 2% 16 4% 0 0% $0.6 2% 0.38

FSU+EE+China $11.5 17% 65 14% 3 17% $7.4 24% 0.64

Rest of World $0.5 1% 12 3% 0 0% $0.4 1% 0.78

----- ------ ------ ------- ------ ------- ------- ------- -------

TOTAL $67.5 100% 455 100% 18 100% $30.9 100% 0.46

i.e. “Bang-per-Buck”i.e. “Bang-per-Buck”PAC/SEA was well below average. Africa & Australia performed bestPAC/SEA was well below average. Africa & Australia performed best

Note:.Estimated values are indiciative only and excludes unreported discoveries

55



0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

By-Product Gold

Primary Gold

Production

Moz of Gold


At first glance Industry is finding enough metal to

meet current production

At first glance Industry is finding enough metal to

meet current production

57

Over the last decade industry found 1293 Mozand mined 920 Moz


0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Unknown

Undeveloped

PreFeas/Feas

Operating

Closed

Moz of Gold

Sources: MinEx Consulting © October 2019USGS (for production data)

Note: Includes by-product gold associated with base metal and other discoveriesData from 2008 onwards have been adjusted for unreported discoveriesHave ignored mining and processing losses

But not all discoveries turn

into mines


into mines

… it takes time

58


0%

20%

40%

60%

80%

100%

0 10 20 30 40 50 60 70

Cumulative %

Years from Discovery

1950-59

Discovery PeriodNumber of Deposits

59

50% after 8 years

69% after 30 years

86% after 60 years80% after

50 years



0%

20%

40%

60%

80%

100%

0 10 20 30 40 50 60 70

Cumulative %


1950-59

1960-69

1970-79

1980-89

1990-99

2000-09

2010-18

FORECAST

Discovery PeriodNumber of Deposits

60

60% after 50 years

Of those that do turn into mines, half (by number) will be

developed within 15 years

Of those that do turn into mines, half (by number) will be

developed within 15 years



0%

20%

40%

60%

80%

100%

0 10 20 30 40 50 60 70

Cumulative %


1950-59

1960-69

1970-79

1980-89

1990-99

2000-09

2010-18

FORECAST

Discovery Period

Contained Ounces

61



Discovery Period

75% after 50 years

Contained Ounces98% after 50 years

62



0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Unknown

Undeveloped

PreFeas/Feas

Operating

Closed

Annual Production

Moz of Gold


Note: Includes by-product gold associated with base metal and other discoveriesData from 2008 onwards have been adjusted for unreported discoveriesHave ignored mining and processing losses


into mines


into mines

63


0

50

100

150

200

250

300

350

1950 1960 1970 1980 1990 2000 2010 2020

Undeveloped

Est Undeveloped

Est Developed

Developed

Production

Production (incl losses)

Moz of Gold


Note: Data from 2008 onwards have been adjusted for unreported discoveriesFrom 1986 onwards have assumed 75% of gold discovered is (eventually) developedAssumes 10% loss for mining and processing

…. Assuming 75% conversion and 10% processing losses, we are struggling to find

enough gold to replace what we mine

…. Assuming 75% conversion and 10% processing losses, we are struggling to find

enough gold to replace what we mine

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– Gold exploration expenditures are extremely cyclical

– Global spend was US$4.4 b in 2019 , down 62% from its peak in 2012 ( of $11.8b)

– Australia doing OK, but other countries impacted by savage cuts

– Discovery rates have plateaued at 35-45 deposits per year

– Over the last decade 1060 Moz was found in 455 primary gold deposits (>0.1 Moz) plus additional 233 Moz in base metal deposits. This includes an adjustment for unreported discoveries

– 32% of the ounces found were in deposits >6Moz, but these only accounted for 5% by number

– 23% of gold found is tied up in base metal and other deposits (as by-product gold)

– Primary gold deposits can have their own by-product credits (such as Ag and Cu). Converting these into gold-equivalent increases the effective size of the (average) discovery by 9%

– Over the last decade Australia and Africa did well (at the expense of Latin America)

– By number, 17% of the discoveries were in Australia, 32% in Africa and 12% in Canada

– In terms of contained gold, 14% was found in Australia, 30% in Africa and 14% in Canada

– Top 10 “Hot Spots” are Alaska/Yukon, SW USA/Mexico, Northern Ontario, Latin America, West Africa, NE/Central Africa, Turkey / Carpathian Belt, China, Far East Russia and Western Australia

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– Slow decline in the average size, Was ~5 Moz in 1980s and 1990s). Currently 3.2 Moz … but this is likely to grow over time as the deposits are fully drilled out

– Average grade has tripled in the last decade (from 0.8 g/t to 3.1 g/t) .... Driven by several large high grade underground discoveries. Looking at open pit and undergound deposits seperatelyshows that grades have remained steady over the last 50 years at 0.8-1.2 /t and 4-6 g/t

– Depth is gradually increasing over time …5-10 metres per decade

– Over the last decade the average depth of cover was 66 metres , made up of 14m for greenfield and 242m for brownfield.

– Half of the deposits (mainly GF) found were outcropping (and most of these were in Africa).

– Over the last decade Junior companies accounted for 45% of the exploration spend, 64% of gold discoveries (by number), 62% of the ounces and 54% of the value created

– Major companies were mainly focused on fining giant deposits. Over the last decade, they accounted for 39% of the spend, 9% of the discoveries, 17% of the ounces and 21% of the value

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Suggests that (at a global level) the residual endowment is still good

Suggests that (at a global level) the residual endowment is still good

Juniors performed better than the Majors !!Juniors performed better than the Majors !!


– 72% of the value created was tied-up in Tier-1 and -2 discoveries (10% by number). These are rare – only 3-4 being found each year in the World.

– Currently costs ~$130m per discovery

– Costs driven by (short term) cyclical and (long term) structural factors

– Due to cyclical factors (high cost for geologists and drill rigs) unit discovery costs blew out in the last decade … peaking at $97/oz in 2013. Has since dropped back to $37/oz

– Over the long term costs are rising by $8/oz per … driven by remoteness, increased dept of cover, additional social and environmental issues

– Average cost over the last decade was $62/oz. Costs vary widely by Region – the lowest was Africa ($31/oz), Australia ($38/oz), Canada ($81/oz).The highest was Pacific SE Asia (>$400/oz)

– In terms of Value/Cost (i.e. “Bang-per Buck”) over the last decade the industry created $0.46 worth of value per each Dollar spent on Exploration. Australia ($0.91) was the best performer.

Hopefully this will improve over time – as costs come down and recent discoveries grow in size and quality

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– Over the last decade, industry found 1.4 oz of gold resource for every ounce mined. However, not all discoveries turn into mines (50% by number, 75% by metal) and not all resource ounces are turned into reserves. For those deposits that do get developed, the average delay between discovery and startup is now 15 years (and rising).

After factoring in processing losses, it is clear that the industry isn’t finding enough (economic and socially acceptable) gold to replace what it mines.

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On this basis, the industry is currently struggling to sustain itself.

As a consequence the gold price has to rise (to stimulate more exploration and make more projects economic) or we have to

either to be smarter/more efficient at exploration


Copies of this and other similar presentations can be downloaded

from my website

Copies of this and other similar presentations can be downloaded

from my website

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Managing Director, MinEx Consulting Adjunct Professor ...minexconsulting.com/wp-content/uploads/2019/12/... · Adjunct Professor, Centre for Exploration Targeting , UWA 28th November

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