Gold has had a good run, but it appears to be set up for a decline.This rally has had an effect on sentiment, turning bears into bulls. Judging by the opinion polls, when optimism was this high in the past, gold had a very high probability of being lower one to three months later. The rising bullion price has also affected trading. Hedgers are holding 40% of open interest net short, a condition that has led to losses over the next three months two-thirds of the time.
Price action adds to the evidence. On Friday, price popped through the $1345 resistance intraday but failed to hold the gain, closing at the low of the day, a swing of about $10. In fact, the gold price is at an overhead resistance level as the weekly and the monthly gold price cycles are topping together. This alone makes it quite doubtful that gold will break out to the upside. I add that the U.S. dollar cycle has bottomed.
The elements of a top are developing. Reduce gold holdings.
Chart 1: Gold at Resistance Levels
Gold is up against resistance. CYCLES RESEARCH INVESTMENTS LLC
Chart 2: Gold Weekly Cycle
The weekly cycle is cresting. CYCLES RESEARCH INVESTMENTS LLC
A gold and copper mine proposed for the Sepik region in Papua New Guineaby an Australian-based company threatens to destroy the health of a major river system, poison fish stocks and cause violent unrest, a report has found.
The Chinese-owned company, PanAust, says the Frieda river project could have a 45-year life span and generate A$12.45bn in tax, royalties and production levies for the PNG government and landholders.
But the report, from research centre Jubilee Australia and Project Sepik, raises serious environmental and social concerns about the mine.
“The lack of information released by the company about its environmental management plans are continuing to cause uncertainty about whether the company’s environmental management plans will be fit for purpose,” it says.
The report notes that one of the PanAust project’s biggest challenges will be building a safe storage facility for the mine’s tailings (waste material left over after separating the valuable mineral from the ore) to prevent acid rock drainage.
That occurs when mine waste is exposed to oxygen and produces sulphuric acid, which dissolves heavy metals such as mercury from nearby rocks, which can then leach into rivers.
The report says the size of the ore body, combined with the relatively low grade of copper in the deposit, means the mine will generate substantial tailings.
“The inaccessibility of the terrain will pose challenges when it comes to finding a large enough site or sites for storage,” it says.
“The extremely high rainfall in the area and the fact that the area is a site of seismic activity add to the risks of a dam collapse. The technical complexity of the feat facing the mining engineers, the extremely large costs involved, and the weather and seismic situation all adds up to a very expensive environmental management problem and one with considerable risks.”
Locals also have concerns about environmental damage from an increase in the number of large vessels operating on the Freida river.
PanAust promised in April it would shortly release an environmental impact statement to nearby villages, but researchers say it has not done so.
In response to to questions from Guardian Australia, the company said PanAust had not received a copy of the Jubilee report and “as such, the company is not in a position to comment on its contents”.
It did however say that PanAust had submitted its plans and an environmental impact statement to PNG regulators and was working with them on its approval.
The report also accused PanAust of a flawed consultation process with indigenous communities downstream from the mine which has created an “atmosphere of animosity and lack of trust” and resulted in acts of sabotage.
“There are reports of official (mainly police) intimidation of anti-mine activists,” the report says.
“In 2017 a youth leader from Oum 2 village led a group of young men to attack a tugboat and pontoon with homemade wire sling shots.”Advertisement
In October researchers visited 23 nearby villages, where locals repeatedly raised concerns about river and fish health as a result of increased sedimentation from increased tugboat traffic connected with the project.
The Freida river joins the 1,126km Sepik river, which flows across the provinces of West Sepik and East Sepik provinces.
The local economy is built on the sale of sago (starch from a tropical palm stem), fish, freshwater prawn, eels, turtles and crocodile eggs. Crocodiles are also harvested for their skins and teeth. Locals are worried about the mine affecting their food security, the report says.
It has promised 5,000 jobs in construction and 2,100 in mining, and estimates there may be 30,000 more indirect jobs.
“Host communities, especially in rural areas, will benefit from access to improved transport, telecommunications, health, education and government services that will support a higher quality of life and greater social participation,” the company said.
“More broadly, training and employment of Papua New Guineans will provide the skills and capacity to support the nation’s future development and prosperity.”
The company said a final investment decision would be linked to financing and fiscal terms agreed with the PNG government during the approvals phase.
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The chairman of Bougainville Hardliners Group and former combatant-turned-businessman, James Onartoo, has called on the Autonomous Bougainville Government (ABG) Police Minister to explain what the Australian Federal Police (AFP) were doing at the site of the controversial Panguna mine last Wednesday.
According to Onartoo, members of the communities around the mine site became suspicious when they saw the Australian police taking GPS readings at various points around the mine.
These points included the one where the mining company BCL had considered building an airstrip in the early part of the Bougainville crisis to fly in aircraft supposedly to evacuate expatriate mine workers and their families out of Panguna.
“I think the public is owed an explanation as to what is happening. To the best of my knowledge the AFP were ousted in 2007 on suspicions of spying on the ABG and the people of Bougainville by the former President, late Joseph Kabui,” Onartoo said.
“Their presence at Panguna, which is the site of so much controversy and disagreements plus issues of sensitive nature stemming from proposed reopening by ABG, raises serious questions considering the fact that in the past Australia always supported military intervention by the PNG Defence Force to regain control of the mine.
“If AFP can raid the ABC office in Australia itself, then they are capable of anything, including maybe gathering intelligence on ground for the purpose of regaining control of Panguna and restarting the mine with use of force,” Onartoo said.
Onartoo said that it is a well known fact that Australia’s interest in the mineral deposits at Panguna never declined and Australian advisers to ABG have denounced agriculture, tourism, fisheries and other sustainable industries, claiming that only mining is able to finance Bougainville’s independence.
Several companies which are vying to reopen the Panguna mine, which was shutdown by landowners in 1990, are also of Australian origin.
The AFP party, which comprised three policemen and two civilians – including a doctor – were escorted on their visit to the autonomous region by the Bougainville Service Commander, Francis Tokura and police personnel.
They are also said to have visited the proposed border post sites at Koromira and Kangu Beach.
Onartoo said he had nothing to say about AFP visiting other parts of the Autonomous Region.
Meanwhile, Bougainville deputy police commissioner, Chief Inspector Francis Tokura, says there is nothing suspicious about the presence there of Australia Federal Police last week.
But Tokura says they were there as part of preparations for the international police support team that will be in Bougainville at the time of its referendum on independence in October.
That mission, to be led by New Zealand, will also include police from Fiji, Solomon Islands and Australia.
China extended its gold-buying spree, adding to reserves for a sixth
straight month, as the protracted trade war with the U.S. hurts growth
expectations and boosts demand for a portfolio diversifier.
Bank of China increased its bullion reserves to 61.61 million ounces in
May from 61.10 million a month earlier, according to data released on
Monday. In tonnage terms that’s a rise of 15.86 tons, after almost 58
tons of gold were added to the nation’s stockpile in the five months to
rise reflects the government’s “determined diversification” away from
dollar assets, Argonaut Securities (Asia) Ltd. analyst Helen Lau said,
adding that retail demand has also picked up. At this rate of
accumulation, China could buy 150 tons in 2019, according to Lau.
China, the world’s top gold producer and consumer, is facing
the prospect of a slowing domestic economy as the Trump administration
raised tariffs on Chinese imports and looked to cut off companies such
as Huawei Technologies Co. from the U.S. market. The latest PBOC data
signal that China has resumed buying at a steady pace after a pause from
late 2016 to last December.
a diversification away from the U.S. dollar, particularly given the
trade tensions and the potential technology cold war that’s evolving,”
said Bart Melek, global head of commodity strategy at TD Securities. “We
have to remember that gold is nobody’s liability.”
prices have risen for the past three weeks, hitting the highest level
since April 2018, as investors seek out havens and traders increase bets
that the Federal Reserve will cut interest rates following signs of
weakness. Spot gold was at $1,329.60 on Monday, after climbing 1.7% in
China has previously gone long periods
without revealing increases in gold holdings. When the central bank
announced a 57% jump in reserves to 53.3 million ounces in mid-2015, it
was the first update in six years.
The PBOC’s move comes as other central banks, especially from emerging markets, increase bullion holdings. First-quarter purchases were the highest in six years, according to the World Gold Council.
Nickel Mines Ltd (ASX:NIC) has advised that the company’s 17% owned Ranger Nickel Project has produced its first nickel pig iron (NPI), a development that could see the company’s shares push up towards higher levels, particularly given broker valuations are in the order of 90 cents per share.
On May 30, 2019, Shanghai Decent, the company’s operating partner and 83% equity holder in the project advised that first NPI had been produced from one of Ranger Nickel’s two rotary kilns in a maiden production run.
The commissioning process and ramp-up to full production will be consistent with that implemented at the company’s 60% owned Hengjaya Nickel Project and across the 20 other RKEF lines currently in operation within the Indonesia Morowali Industrial Park (IMIP).
Nickel Mines managing director Justin Werner highlighted that this milestone had been achieved well ahead of schedule saying, “Nickel Mines is extremely pleased to be able to report the significant milestone of maiden NPI production from the first Ranger Nickel kiln.
“Once again we thank our partner Shanghai Decent for their commitment to delivering this project well ahead of schedule and for supporting the company in its endeavours to rapidly move to increase our equity interest in the Project.
“With a 60% interest in both the Hengjaya Nickel and Ranger Nickel Projects, Nickel Mines will have achieved a production profile of approximately 20,000 tonnes of nickel metal per annum in just over 15 months, with further optionality to increase our interest in both projects to at least 80% over the next 12 months.
Fast tracking of acquisition validated
Ranger Nickel’s second kiln is anticipated to commence commissioning by early July, with both kilns expected to take approximately two months to ramp up to 80% of capacity.
The commissioning of Ranger Nickel comes well ahead of previous guidance for midway through the September quarter and underpins the company’s decision to fast-track its acquisition of a further 43% interest in the project as announced in April.
Nickel Mines will now enjoy earlier than anticipated cashflow from Ranger Nickel, and by exercising its contractual option within 60 days of first NPI production the company will also benefit from acquiring its additional interest at a discounted valuation of US$280 million.
These developments should also position the company well to deliver on broker forecasts which point to a substantial profit in fiscal 2020.
Bell Potter analyst, David Coates is forecasting sales of US$516 million in fiscal 2020 which he expects will underpin an attributable net profit of US$139 million, representing earnings per share of 12.5 cents in Australian dollars.
This places the company on a steeply discounted forward PE multiple of 3.4 based on its current share price.
Nickel Mines is Coates’ ‘top pick’ in the sector, and his valuation of 93 cents per share, implying a PE multiple of 7.4 appears to better reflect fair value than that represented by its recent trading range.
Both kilns ramp up production
Further to the strong maiden quarter of production at Hengjaya Nickel, both kilns have continued to ramp up production over April and May.
The month of April saw the production of 1,289 tonnes of nickel metal at an average NPI grade 14.7% at an All-in-Cost of US$8,140/tonne.
As at May 30, monthly production had reached 1,518 tonnes of nickel metal at an average NPI grade of 13.4%.
While cost data for May is not yet available, the price received in April was US$12,800 per tonne of nickel sold and in May it was US$11,800 per tonne, which as indicated below implies healthy margins above the all in cost.
On that note, Werner said, “With Ranger Nickel set to replicate the strong production performance of Hengjaya Nickel, we are confident we are on track to establish a world class nickel company that can lay claim to the lowest capital intensive, and among the most profitable nickel units in the global market, establishing Nickel Mines as a preferred nickel exposure amongst its global peer group.”
President and Chief Executive Mark Bristow, along with Zijin Executive
Director and Senior Vice President George Fang, met today with Papua New
Guinea’s new Prime Minister James Marape and reaffirmed the company’s
commitment to working with the PNG government and local communities to
ensure that the Porgera gold mine continues to deliver value to its
stakeholders past the expiry of the current Special Mining Lease on
August 16, 2019.
While in the country, Bristow also held
meetings with Enga Governor Sir Peter Ipatas, Porgera landowners, and
Since pouring its first gold in 1990,
Porgera has paid more than Kina 3.6 billion ($1.1 billion) in taxes and
Kina 1 billion ($297 million) plus Kina 600 million ($178 million) in
equity cash payments and royalties respectively to the provincial
government and customary landowners. This represents a significant
contribution to the country’s economy, as well as a substantial amount
to the landowners on whose properties the mine is located. An
application to extend Porgera’s special mining lease for a further 20
years is currently in progress.
Bristow said Porgera was an important
long-term asset for PNG as well as the mine’s owners, Barrick Gold
Corporation and Zijin Mining Group.
“The proposed extension to its lease will
allow the mine to remain productive for at least another 20 years. To
sustain mine operations, however, it will require a significant capital
injection, and it is difficult to justify that kind of investment
without the security of an extended mine lease,” he said.
“Barrick believes in true partnership
with our host countries, sharing both the responsibilities and the
benefits that come with mining. We are engaging with the government to
breathe new life into our long-standing partnership, so that Porgera
continues to deliver value to all its stakeholders. In our meeting with
the Porgera landowners, we invited our stakeholders to join us in
continuing to improve the quality of life, security and welfare in the
Porgera is a joint venture between
Barrick and the Zijin Mining Group, which each owns 47.5% with the
remaining 5% interest being held by Mineral Resources Enga (owned
equally by Porgera Special Mining Lease Landowners and the Enga
Provincial Government). The mine is operated by Barrick (Niugini)
About the Porgera JV The Porgera gold mine is in the Enga Province of
Papua New Guinea at an altitude of 2,200 – 2,700m. It is 130km west of
Mt. Hagen and 600km northwest of the capital Port Moresby. Porgera
employs over 3,300 Papua New Guineans of which 1,900 are from Porgera
and nearby Enga. Over the life of mine it has produced more than 20Moz
of gold and contributed approximately 10% of Papua New Guinea’s total
annual exports. Since inception, the mine has distributed K1 billion
($297.2 million) to landowners and the provincial government, has spent
K4.9 billion ($1.4 billion) on contracts with PNG businesses, of which
K1.2 billion ($356 million) on businesses in Porgera, and K480 million
($142 million) on schools, health facilities, water, electricity, roads,
and community programs.
About Barrick On January 1, 2019, a new Barrick was born as a
result of the merger between Barrick Gold Corporation and Randgold
Resources Limited. Shares in the new company trade on NYSE (GOLD) and
The merger has created a sector-leading
gold company which owns five of the industry’s Top 10 Tier One gold
assets Cortez and Goldstrike in Nevada, in the United States (100%);
Kibali in the Democratic Republic of the Congo (45%); Loulo-Gounkoto in
Mali (80%); and Pueblo Viejo in the Dominican Republic (60%) and two
with the potential to become the gold assets of the first level:
Goldrush / Fourmile (100%) and Turquoise Ridge (75%), both in the United
States. With mining operations and projects in 15 countries, including
Argentina, Australia, Canada, Chile, the Ivory Coast, the Democratic
Republic of the Congo, the Dominican Republic, Mali, Papua New Guinea,
Peru, Saudi Arabia, Senegal, the United States and Zambia, Barrick has
the lowest total cash cost position among its senior gold peers and a
diversified asset portfolio positioned for growth in many of the world’s
most prolific gold districts.
Kingston Resources Ltd (ASX:KSN) has completed an 11-hole drilling program at its Misima Gold Project in Papua New Guinea, aiming to provide infill and validation data in an area east of the historic Ewatinona open pit.
A total of 1,476 metres were drilled, with each hole also providing important structural data confirming the position and orientation of mineralised breccia zones.
The company is also conducting exploration work to further define the prospective Misima North and Umuna East areas at Misima.
Trenching and mapping programs underway at Ara Creek will further define targets for which drilling is planned to begin in the September quarter.
Geochemical work in the area has shown high-grade results and Kingston believes the structural position of Misima North suggests it has potential to be a northern extension of the main Umuna shear zone.
This zone is where Placer mined 3.7 million ounces of gold in the 1990s and still hosts 2.6 million ounces of Misima’s resource.
After a short rally at the start of 2018 year peaking at $1,354/ozt on March 25, the gold price fell steadily during Q2 and Q3 to USD 1,176/ozt on August 16, and then rebounded to $1,280/ozt on December 28. We analysed the effect of the gold price on the gold mining industry using data from the Mining Intelligence Data Application. The data we used represents companies reporting quarterly production and listed on the following stock exchanges: TSX (+TSX-V), ASX, LSE (+LSE-AIM), NYSE, and JSE.
Major gold producers’ global aggregated quarterly operating income followed the gold price and shrank by 44% during the year, from $2,500 million in Q1 to $1,400 million in Q3 and remained steady in Q4 2018 (Figure 1).While aggregated operating income is often considered a reliable indicator to measure operating efficiency and performance, we dug deeper in our Q4 2018 review of the gold mining industry. We looked at three further metrics: quarterly gold production, all-in sustaining costs, and capital raisings. The data indicates the following:
Figure 1. The average gold price charted against gold companies’ aggregated operating income.
Reported global gold production for Q4 2018 was 16.8 Mozt, or up about 2% compared to Q3 2018.
Quarterly gold production reported by publicly-traded companies accounts for about 65-70% of total global gold production and can be considered an indicator of the overall state of the global gold mining industry.
Reported global average quarterly all-in sustaining costs were 3% lower than in Q3 2018. Overall, gold producers reacted relatively quickly to the deteriorating gold market conditions and managed to reduce their costs by making efforts to catch up with shrinking margins.
Capital raisings completed by gold producers, developers, and explorers rose by 17% from Q3 to Q4 indicating investors started gaining confidence again.
Reported global gold production:
For the Q4 ending December 31, 2018, global reported gold production totalled 16.8 Mozt. North America was the largest gold producer (4.3 Mozt), followed by Africa (3.5 Mozt), and Australia & Oceania (3.0 Mozt).
The three regions that drove the 2% quarter on quarter increase in global gold production were North America (+266 kozt, or up 7%), South America (+215 kozt, or up 10%), and Australia & Oceania (+148 kozt, or up 5% from Q3 2018). Production in Asia took a nosedive — dropping 32% due to significant decrease in gold output recorded at Indonesia’s Grasberg mine.
Figure 2. Global quarterly gold production on regional level, Q2 2018 vs. previous quarters, kozt.
Annual reported gold production for 2018 was 64 Mozt, or up about 3% compared to 2017.
With 620 kozt of gold mined in Q4 2018, Barrick’s Goldstrike production center in Nevada, USA, was the world’s lead gold operation, well ahead of its competitors (Table 1).
Indonesia’s unique Grasberg gold-copper mine — control of which was transferred from Freeport McMoran to the local government — lost its first place in global production ranking in Q4 (391 kozt) because of a drastic drop in gold output due to the transition from open-pit to underground mining. Despite this, Grasberg took over the position of being the world’s biggest gold producer from Muruntau mine in Uzbekistan (state-owned, thus not shown in this review due to lack of reported quarterly production numbers) by the end of 2018. Annual gold production at Grasberg jumped to a record 2.7 Mozt level in 2018, or up 73% compared to 2017.
Third and fourth in this ranking are Polyus Gold’s gigantic Olimpiada mine in Russia (345 kozt) and Barrick’s Pueblo Viejo mine in Dominican Republic (277 kozt).
Seven out of the top 10 biggest gold mines reported growth in Q4 2018 gold output while three faced declining production rates. The biggest gains in gold production were achieved at Kumtor (up 86%), Lihir (up 38%), and Geita (up 22%) mines.
Reported global average quarterly all-in sustaining costs
Global average all-in sustaining costs (AISC) fell 6% during the course of 2018, or from $1,050/ozt in Q1 to $988/ozt in Q4 2018 (Figure 3). This indicates that companies overall continued to react quickly when the gold price declined. In Q4 2018, nine out of the top 10 lowest cost mines further decreased their AISC compared to Q3 2018 (Table 2).
Mining Intelligence focused on primary gold operations’ AISC, i.e. mines where gold contributed to 80% and more of revenues from operating activities generated during the quarter. The ranking excludes tailings re-processing operations, mines where the precious metal is produced as a by-product, and operations where companies report gold-equivalent output.
Figure 3. Global average all-in sustaining costs (AISC) vs. average gold price, ozt.
With $332/ozt, Kirkland Lake’s Fosterville mine in Australia was the lowest cost gold operation in Q4 2018 measured by AISC. In Q4, Fosterville mine’s ore grade was impressive at 39.7 grams of gold per tonne of milled ore, making this the world’s highest-grade major gold mine.
This was followed by Polyus’s unique Olimpiada mine (USD 389/ozt) in Russia, Nord Gold’s Neryungri mine ($441/ozt) in Russia, and Centerra Gold’s Kumtor mine ($508/ozt) in Kyrgyzstan.
Completed capital raisings
The strength of equity markets is a barometer of investor confidence. The amount of capital raised through equity placement directly reflects the sentiment in the mining industry. This indicator clearly shows that in Q4 2018, investors began to regain some confidence in the gold mining industry, with gold producers, developers, and explorers at major exchanges raising 17% more capital compared to Q3 2018 (Figure 4).
The average gold price charted against gold companies’ completed capital raisings.
In Q4 2018, reported gold production continued to increase and global average all-in sustaining costs continued to go down. This is a very positive indication that overall, gold miners are continuing to watch their costs closely while producing more gold. After two very challenging quarters, steady Q4 operating income is likely a result of the improving market conditions. Investors’ confidence in the gold mining industry, while at a low in Q3, has followed the upward trend of the gold price in Q4.
Australia-based Newcrest Mining Ltd’s gold production in the third quarter came in about 5 percent lower than in the prior quarter, hurt by lower production at most of its operations, including its flagship Cadia mine.
Total gold production for the country’s largest independent gold miner for the three months ended March 31 came in at 623,124 ounces, compared with 575,791 ounces a year ago. Production in the December quarter was 654,849 ounces, Newcrest said on Tuesday.
While planned shutdowns hit production at the Cadia mine in New South Wales, Australia, unplanned disruptions at the company’s second largest mine, Lihir, in Papua New Guinea, led to lower recoveries.
Newcrest expects production at Lihir to be at the bottom range of its 950,000-to-1.1 million-ounces target range in fiscal 2019.
Gold Industry Group has committed $5 million to Western Australian netball in a record partnership deal.
The three-year deal is said to be the largest investment in Netball WA’s 95-year history, which will go towards all levels of the sport in the state.
Gold Industry Group members that are in support of the partnership include Gold Fields, Northern Star Resources, Saracen Mineral Holdings, Newcrest Mining, St Barbara, Newmont Australia, AngloGold Ashanti Australia, Gold Road Resources and Ramelius Resources.
The partnership will see Gold Industry Group become the principal partner of Netball WA, an elite partner of West Coast Fever and the first premier partner of Shooting Stars.
“We are delighted by the opportunity to support netball and women’s sport on a scale never before seen in Australia,” Gold Industry Group vice chairperson Kelly Carter said.
Netball WA chief executive and West Coast Fever managing director Simon Taylor added, “This partnership will empower our 230,000 participants across Western Australia to take control of their netball destiny, shape their journey, and work together towards our common purpose of advancing netball, advancing communities.
“Never before has there been an investment of this level in women’s sport in our state.”
Shooting Stars executive officer Fran Haintz said the investment would result in more Aboriginal and Torres Strait Islander girls in schools furthering their education.