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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
Strategic advice on mineral economics & exploration
– 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
Strategic advice on mineral economics & exploration
$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
Strategic advice on mineral economics & exploration
$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%
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration 7
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration
0
20
40
60
80
100
1950 1960 1970 1980 1990 2000 2010 2020
Est Unreported
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 2008 onwards have been adjusted for unreported discoveries
Adjustment for unreported discoveries
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
Strategic advice on mineral economics & exploration
0
50
100
150
200
250
300
1950 1960 1970 1980 1990 2000 2010 2020
Moderate (0.1-1 Moz)
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
Over the last decade, 32% of the ounces found were in deposits >6 Moz
Strategic advice on mineral economics & exploration
0
50
100
150
200
250
300
1950 1960 1970 1980 1990 2000 2010 2020
Est Unreported
Moderate (0.1-1 Moz)
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
Adjustment for unreported discoveries
Adjustment for unreported discoveries
Over the last decade, 32% of the ounces found were in deposits >6 Moz
Over the last decade, 32% of the ounces found were in deposits >6 Moz
Strategic advice on mineral economics & exploration 12
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019Note: Excludes satellite deposits within existing campsData from 2008 onwards includes estimates for unreported discoveries
% 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
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration 16
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration
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
Percentage of deposits found
Source: MinEx Consulting © October 2019
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
Strategic advice on mineral economics & exploration
0
50
100
150
200
250
300
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 yearsExcludes by-product credits
Moz of Gold
Source: MinEx Consulting © October 2019
19
Strategic advice on mineral economics & exploration
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 yearsExcludes by-product credits
Percentage of ounces found
Source: MinEx Consulting © October 2019
In the last decade, has seen large
discoveries in Canada
In the last decade, has seen large
discoveries in Canada
20
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
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
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration
• 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
Strategic advice on mineral economics & exploration 24
Strategic advice on mineral economics & exploration
Source: Matt Bruce September 2019
Coverage halvedbetween 2011 and 2017
Coverage halvedbetween 2011 and 2017
25
Strategic advice on mineral economics & exploration
Source: Matt Bruce September 2019
Coverage halvedbetween 2001 and 2017
Coverage halvedbetween 2001 and 2017
Little Sandy Desert[Potash] South Mt Isa
[Base Metals]
Western Victoria [Cu and Au]
Paterson Range [Cu-Au]
26
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration 28
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration
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
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
31
Strategic advice on mineral economics & exploration 32
Strategic advice on mineral economics & exploration
-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
Source: MinEx Consulting © October 2019
… 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
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
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
Strategic advice on mineral economics & exploration
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
51% of all discoveries
(by number) outcrop
39% of all discoveries
(by Moz) outcrop
39% of all discoveries
(by Moz) outcrop
78%
84%
86%
88%
89%
Average depth is 66 metres
Average depth is 66 metres
Average depth is 159 metres
Average depth is 159 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
Strategic advice on mineral economics & exploration 36
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
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
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
Moderate+Major+Giant primary gold discoveries in Western World: 1975-2017
Note: Figures are adjusted for shared discoveriesExcludes satellite deposits within existing Camps
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
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
Moderate+Major+Giant primary gold discoveries in Western World: 1975-2017
Note: Figures are adjusted for shared discoveriesExcludes satellite deposits within existing Camps
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
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
Moderate+Major+Giant primary gold discoveries in Western World: 1975-2017
Note: Figures are adjusted for shared discoveriesExcludes satellite deposits within existing Camps
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
Strategic advice on mineral economics & exploration
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%
Source: MinEx Consulting © October 2019
Over the last decade Juniors performed
better than the Majors
Over the last decade Juniors performed
better than the Majors
Strategic advice on mineral economics & exploration 42
Strategic advice on mineral economics & exploration
-$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
Strategic advice on mineral economics & exploration 44
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
Note: Primary gold deposits only Caution: No adjustment made for unreported discoveries
N Tier 1 = 59
N Tier 2 = 177
45
Strategic advice on mineral economics & exploration
$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
Strategic advice on mineral economics & exploration 47
Strategic advice on mineral economics & exploration
$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
Source: MinEx Consulting © October 2019Note: Discoveries are for Primary gold deposits >0.1 Moz Au
Excludes satellite deposits within existing campsData from 2008 onwards have been adjusted for unreported discoveries
Strategic advice on mineral economics & exploration
$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
Weighted Average for 1990-99 = $53m
Estimated
Unit costs now running at ~$130m
per discovery
Unit costs now running at ~$130m
per discovery
Weighted Average for 2010-18 = $149m
Weighted Average for 1980-89 = $42m
Source: MinEx Consulting © October 2019
49
Strategic advice on mineral economics & exploration
$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
Strategic advice on mineral economics & exploration
$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
Strategic advice on mineral economics & exploration
$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
Strategic advice on mineral economics & exploration
$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
Source: MinEx Consulting © October 2019Note: Discoveries are for Primary gold deposits >0.1 Moz Au
Excludes satellite deposits within existing campsData from 2008 onwards have been adjusted for unreported discoveries
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
Strategic advice on mineral economics & exploration
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
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Strategic advice on mineral economics & exploration
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
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Strategic advice on mineral economics & exploration 56
Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019Note: Excludes satellite deposits within existing campsData from 2008 onwards includes estimates for unreported discoveries
At first glance Industry is finding enough metal to
meet current production
At first glance Industry is finding enough metal to
meet current production
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Over the last decade industry found 1293 Mozand mined 920 Moz
Strategic advice on mineral economics & exploration
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
But not all discoveries turn
into mines
… it takes time
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Strategic advice on mineral economics & exploration
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
Source: MinEx Consulting © October 2019
Strategic advice on mineral economics & exploration
0%
20%
40%
60%
80%
100%
0 10 20 30 40 50 60 70
Cumulative %
Years from Discovery
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
Source: MinEx Consulting © October 2019
Strategic advice on mineral economics & exploration
0%
20%
40%
60%
80%
100%
0 10 20 30 40 50 60 70
Cumulative %
Years from Discovery
1950-59
1960-69
1970-79
1980-89
1990-99
2000-09
2010-18
FORECAST
Discovery Period
Contained Ounces
61
Source: MinEx Consulting © October 2019
Strategic advice on mineral economics & exploration
Discovery Period
75% after 50 years
Contained Ounces98% after 50 years
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Source: MinEx Consulting © October 2019
Strategic advice on mineral economics & exploration
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
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
But not all discoveries turn
into mines
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Strategic advice on mineral economics & exploration
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
Sources: MinEx Consulting © October 2019USGS (for production data)
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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Strategic advice on mineral economics & exploration 65
Strategic advice on mineral economics & exploration
– 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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Strategic advice on mineral economics & exploration
– 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 !!
Strategic advice on mineral economics & exploration
– 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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Strategic advice on mineral economics & exploration
– 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
Strategic advice on mineral economics & 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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