The gold industry has started to settle following record highs amid the initial outbreaks of COVID-19 in 2020, but what’s next for the precious metal?
Gold continues to be a safe-haven bet for investors, particularly during the ongoing disruptions of the COVID-19 pandemic.
Australian gold exports delivered record revenues in 2020, according to the Australian Bureau of Statistics (ABS), increasing by 12 per cent on the previous year to $27 billion.
This was backed by record prices (in Australian dollar terms) as investors poured money into gold in response to global lockdowns and supply chain issues related to the pandemic.
The gold price did, however, drop by almost 7 per cent in the first half of 2021. While prices sit around the $US1800 mark (at the time of writing), demand has not faltered.
According to the ABS, non-monetary gold increased by $507 million (34 per cent) to $2.12 billion in the June quarter.
“The increase in non-monetary gold was driven by increases to the United Kingdom, up $441 million, and China, up $396 million,” the ABS states. “June observed the second highest non-monetary gold export to China on record.”
Market turbulence aside, junior gold miners are looking to create their own slice of history in the gold market.
Pacgold is an Australian gold explorer currently focused on the Alice River gold project in North Queensland.
The company listed on the ASX in July after closing a $6 million initial public offering (IPO) backed by strong institutional investment early.
“The IPO was supported by institutional investor Resource Capital Funds, which is a tremendous endorsement for the Alice River project because these guys did a lot of due diligence on us and on the project,” Pacgold managing director Tony Schreck tells Australian Resources & Investment. “It’s also a really good endorsement for the team.”
The Alice River project consists of eight mining leases and a number of exploration permits centred on a historical goldfield in Queensland’s Cape York Region.
Several underground mines, which produced 3000 ounces of gold at 30 grams per tonne operated within the area in the early 1900s. Decades later, open pit mining occurred in the 1980s, and colluvial and alluvial ore mining in the late 1990s.
“Historical exploration in the 80s and the 90s has given us exciting indications along the 30-kilometre gold trend,” Schreck says.
“The institutional support gives investors confidence of high-quality targets and the team.”
With the company now listed on the ASX, Schreck expects the brownfields project to deliver exciting results as the exploration program progresses.
“We’ve put in a lot of initial work ourselves with seed capital to generate the targets and get the ball rolling,” Schreck says.
“This raise will accelerate exploration on the project and get these targets drilled and hopefully put resources around that drilling.”
The company will focus on its most compelling targets in the first phase of drilling, with IP geophysical surveys already underway.
“I think what Pacgold brings to the table is a new perspective – it’s a completely reinvigorated story,” Schreck says.
“Out of the last 18 months, very few junior gold IPOs have been able to attract institutional investors at the IPO level, let alone being able to secure one that was willing to cornerstone an IPO upon lodgement of a prospectus. That is probably our biggest point of difference.”
For Schreck, Pacgold has played its cards right as it gears up at Alice River.
“In the current gold market, a good story that has potential and scale is something that I think is attractive,” he says.
“Investors in junior explorers are looking for that big discovery and many multiples of return, so what I believe you need for a company to deliver is a big gold system to start with.
“That’s what we can demonstrate now. Once you’ve got a big footprint, then you can find a big deposit and in a strong gold market, that’s what we’re bringing to the table.”
At the other end of the scale in the Australian gold sector, production is surging despite the impacts of labour shortages and COVID-19 disruptions.
With gold prices easing in the first half of 2021, the share prices of the world’s leading producers have however fallen as a result.
S&P Global Market Intelligence’s report of the top 25 mining and metals companies found that the share prices of Newmont and Barrick Gold declined by 13.7 per cent and 10.5 per cent, respectively.
However, Newmont president and chief executive officer Tom Palmer says the company met its production guidance despite COVID-19-related impacts.
“Our portfolio will produce steady gold production of more than 6 million ounces per year through until at least 2030, balanced across each of our four regions,” Palmer says.
In Australia, Newmont operates the Boddington (Western Australia) and Tanami (Northern Territory) gold mines.
The United States-based company was forced to quarantine 700 workers at the Tanami mine for two weeks from late June after a fly-in, fly-out worker at the site was infected by COVID-19.
In addition to this disruption, Newmont has also faced labour issues in Australia, with a 3 to 5 per cent cost increase for materials, energy and labour being factored into its guidance.
Palmer says the impacts of the pandemic are driving inflation around the globe.
“There’s a high demand for operators, maintainers and technical people … where the state governments, the provincial governments in Australia are constantly opening-closing borders,” Palmer says.
“So there is a real push on to the employing out of the state, so you’ve got that reliability in the staff being within the state.
“And we’re likely to have in Australia those interstate pressures for still some time to come, given the slow take-up of the vaccination, which is certainly … now with the Delta strain of the virus.”
Mid-tier gold producer Ramelius Resources also regards labour shortages as an issue despite production at the company hitting all-time highs.
The company continued to increase its gold production with a record 272,109 ounces mined at its Western Australia mines during the 2021 financial year.
Ramelius is, however, looking for strategies to remain an employer of choice in a competitive labour market.
“We try to be attentive to employees’ needs and look to ensure we are competitive in the current market,” Ramelius managing director Mark Zeptner says.
“We like to think that Ramelius is a good place to work with a variety of different sites that allow for differing experiences and career progression.
“The skills/labour shortage is real and every resource company in Western Australia will be dealing with this issue now and at least for the next six to 12 months.”
Ramelius’ production, while narrowly missing its fiscal year guidance, was strengthened by strong results at the Edna May and Mt Magnet gold mines.
“The record result was achieved through continued solid production at Edna May and with an outstanding year from Mt Magnet,” Zeptner says.
“The result continues the Ramelius growth story and provides an excellent foundation for the 2022 financial year and beyond, with an experienced management team and strong balance sheet in place.”
The Australian gold industry is increasingly active, but with COVID-19 challenges lingering, companies are adapting to a new and unprecedented environment.