The price of gold has been trading at record highs in 2024 amid global economic uncertainty. Picture: David Gray, AFP.
Australia’s lithium mining industry may have had its chance to shine last year, but it is those digging gold out of the ground that are back in favour among resources investors.
As the Diggers & Dealers Conference gets underway in Kalgoorlie this week, investors have once again made gold a key area of focus.
But while producers are in favour, it’s a different story for gold developers, who face a tough journey getting projects into production.
“Exploration is hard,” Westgold Resources managing director Wayne Bramwell said.
“Being a single mine project developer is really hard and it is a massive leap to get to that point where you can become a portfolio company where your risk is somewhat mitigated by having multiple production outlets.”
Meanwhile, Bellevue Gold with its recent $150m-plus raising proved that gaining investor backing and moving into production can be a bumpy path, surprising investors with its raise and lower-than-hoped forecast production levels.
“Bellevue has done a good job to get into production, but it is proving more difficult than they promised the market and there are growing pains that come with that,” Barrenjoey mining analyst Daniel Morgan said.
The conference gets underway in earnest with 66 corporate presentations from listed miners, exploration companies and also 159 exhibitors from the sector.
Investors made their way to Western Australia ahead of Diggers and Dealers, with Bellevue Gold holding a site visit last Wednesday and Gold Road Resources the previous Thursday, before they made their way to Northern Star’s Super Pit gold mine on the outskirts of Kalgoorlie.
Diggers & Dealers kicks off in Kalgoorlie on Monday.
Accommodation is tight for delegates at the conference, and some side step the event, instead using the build-up as an opportunity to schedule meetings in Perth. But it still attracts over 2000 delegates.
Lithium miners stole the show last year, as producers of the material used for batteries were in favour with the anticipated ramp-up in electric vehicle manufacturing.
But the commodity’s price has come off the boil while gold strikes record highs in 2024, with the roll out of EVs now expected to take longer than anticipated.
“If you went back last year or the year before, what was remarkable was lithium, which had been a small commodity, had really come to dominate the proceedings at Diggers and Dealers,” Mr Morgan said.
“The Australian dollar gold price is high, and lithium and nickel are having a very tough time of it and not likely to be as focused on growth. Nickel and lithium are battening down the hatches.”
Domestic gold production growth has slowed over the past decade as mines approach the end of their productive lives, says IBISWorld, but gold production is set to return to growth as project expansions come online, capitalising on the weaker Australian dollar.
The industry’s annual revenue is about $27.9bn and growing at a rate of 4.4 per cent as the metal continues to act as an inflation hedge and benefits from central bank purchases.
Australia is the third largest producer globally with 293.8 tonnes in 2023, behind China and Russia says the World Gold Council.
Lithium miners dominated the mergers and acquisitions landscape in the resources industry last year, with Albemarle bidding for Liontown Resources (it later abandoned the deal), SQM acquiring Azure Minerals, Chalice Mining looking for a backer and speculation about a move on Patriot Battery Metals by Pilbara Minerals, which was sitting on a $3bn cash pile.
But investment bankers have now turned their attention back to gold.
Heading into the conference, there was talk that Regis and Gold Road Resources might merge.
The intention of Ramelius Resources is also in focus with an 8.9 per cent stake in Spartan Resources; West Gold and Ramelius have held takeover talks; and there’s the ever-talked about takeover target De Grey Mining.
The Kalgoorlie Super Pit, owned by Northern Star Resources.
Raleigh Finlayson has repeatedly emphasised his focus is on operations rather than deals for his Genesis Minerals, but the company is surrounded by consolidation opportunities in WA’s Leonora gold district, while eventually it’s expected Northern Star makes a move when it comes to a deal, moving to gain further scale after the country’s largest gold miner Newcrest was taken over by Newmont.
Driving M&A, Bramwell says, will be producers with cash.
“This is a time when the producers are cashed-up and the explorers and the people in the middle are cash-strapped.”
Off the agenda appears to be buying activity in Canada, where groups like Evolution Mining have failed to impress investors with its North American acquisition.
Also gaining attention at Diggers and Dealers will be rare earths producer Lynas showcasing its new Kalgoorlie facility.
Lynas has flagged that the ramp-up of its facility would not be at such a rapid pace, as rare earths demand comes off the boil due to strong supply out of China.
Also of interest this year will be uranium miners like Boss Energy and Paladin, as the fuel remains at the centre of the energy debate and demand grows with a lack of supply to the west from Russia.
“There’s a lot of enthusiasm towards the sector. Its prospects are still high and have not dimmed as much as lithium or nickel or rare earths have,” Morgan said.
“It is probably your second bright spot under gold. Gold probably has more swagger in the last couple of years.”
Morgan said a key question when it came to gold was whether there would be better cash flow out of the record gold price.
As well as a strong gold price, another positive for the sector could be with nickel producers mothballing projects, such as BHP with Nickel West, there could be better access to workers with lower staff turnover, which can be as high in some cases as 30 per cent.
Mr Bramwell said staff salaries would fall when the iron ore industry cut workers, but there was better access to workers than a year ago.
Westgold was supporting developer Ora Gold by acquiring a stake, because it “ticks all the boxes” in that it has people committed to doing good science and committed to good quality work
SPR Price at posting:
$1.21 Sentiment: Hold Disclosure: Held
The price of gold has been trading at record highs in 2024 amid global economic uncertainty. Picture: David Gray, AFP.
The Kalgoorlie Super Pit, owned by Northern Star Resources.
(20min delay)