Good as gold - Commodity Day 2009
Michael Forrest reviews the IOM3 2009 Commodity Day, held on 24 November in London, UK, which focused on gold.
In the 2009 Corporate Exploration Strategies survey by Canadian company Metals Economics Group, gold accounted for 39% of exploration spend (base metals accounted for 41%). Although it reveals a 42% decline from the US$14.4 billion of 2008, the predicted demise of the majority of the junior companies at the hands of reluctant financiers did not come to pass. In the first nine months of 2009, over 300 equity financings took place in exchanges around the world, each raising a minimum of US$2m.
At the IOM3 2009 Commodity Day in November exploration was discussed by Professor Laurence Robb, Visiting Professor at the Department of Earth Sciences, University of Oxford, UK, whose company Savannah Gold Ltd is working in Nigeria. Twice the size of France, Nigeria has seen little exploration for gold and base metals in the past 40 years as the oil industry developed. Nevertheless, its neighbours to the west, east and north have substantial gold deposits and mines. It has been established that Archean and Proterozoic aged rocks are present, mirroring adjacent countries with the crucial difference of the imprint of the 500 million year Pan African thermal event. The Pan Africa event metamorphosed existing (older) rocks such as those that contained gold in Archean and Proterozoic rocks.
The question yet to be answered in Nigeria is did this event concentrate to disseminate gold? Widespread gold mineralisation, is largely found within schist belts that trend southwest and northeast across the country. These belts contain abundant banded iron formations, manganese enrichments and orogenic gold associated with high strain zones.
One company with an enviable track record in gold exploration is UK registered Cluff Gold. Douglas Chikohora, Technical Director, reviewed the company’s activities which include the Kalsaka mine in Burkina Faso and the Angovia project in the Ivory Coast. Both mines are heap leach operations and were brought into production in under four years.
At Kalsaka the first gold pour was in October 2008 from a low capital plant cost of US$31m. Measured and indicated reserves are 12.1Mt grading 1.6g/t gold.
The company also has extensive exploration properties in West Africa. Most prominent is the Baomahun in Sierra Leone, where prospective Archean banded ironstone hosts measured and indicated reserves of 12Mt grading 2.9g/t. According to Chikohora, ‘Soil sampling and magnetic surveys over the hilly and forested licence areas proved successful in delineating the reserves backed up with 7,000m of core drilling. Discovery costs are equivalent to US$9 per ounce’.
Pat Forward, Vice President Projects and Exploration, of Canadian registered European Goldfields plc, where outlined the gold potential of the Tethyan belt (a major porphyry-related mineralised zone that extends across central and southeast Europe, Turkey, Iran, Pakistan, through the Himalayan region into Burma, Malaysia, Indonesia and Papua New Guinea), the company’s mines in Greece, and its exploration properties in Romania and Turkey. In Greece, production at the Stratoni mine of over 30,000t of zinc and lead is providing income for developing gold projects. At Olympias, around eight kilometres
north of Stratoni, the company is exploiting over 101,000t of previously-mined surface resources in the form of concentrates. The in-ground resources are based on massive sulphide mineralisation related to intrusions along the Stratoni fault that links all the deposits in the area.
Exploration targets at porphyry-based Certej and Ardala, in Romania and Turkey respectively, indicate the potential for gold mining in the Tertiary-Cretaceous arcs that mark the closure of the ocean that divided Europe and Asia from Africa and Arabia.
Going to market
The Gold Day was not all about exploration. Supply/demand and new applications define the market. According to Neil Meader of London-based consultancy Gold Fields Minerals Services (GFMS), mine supply is set to increase in 2009 by four per cent although below the peak of 2001. This, however, masks the overall long-term decline inmined/supplied gold that is expected to continue. The high prices of 2009 have stimulated the gold scrap market with record recoveries but those same elevated prices have curtailed the demand for new jewellery.
These trends were further explored by Gavin Ferrar of investment bank Investec, London. The high value of gold has introduced new investors to the market and, despite the recession, significant capital has been raised this year (US$550m in London and US$5bln globally). Sources included private equity, hedge funds and bank loans. The cost of the latter has risen, with examples of 46% over three years for a Structured Note and 18% for three and a half years for expansion finance. The demand for bank finance is robust, especially for acquisitions, as buyers look for good deals from distressed companies. There remains a pool of lenders in the market.
In summarising the market, Ferrar stated, ‘Banks are open for business, especially for gold debt and equity financings. There has also been a shift away from mandatory gold hedge programmes, but care must be taken to ensure the full cost of capital raising is understood’.
‘The use of gold in industry is lower than that for other precious metals,’ noted Dr Chris Corti. His company, Reading, UK-based COReGOLD Technology, is researching industrial uses of gold and notes that new technologies will increase demand for the metal. At present, only 11% of gold is used in industry with electronics, dental and architectural glass being prime consumers.
The ability for gold to form particles of less than five nanometres in size on an oxide base has applications in catalysts. Of particular interest is the potential use in diesel engines to replace platinum in exhaust technology. In petrol engines, platinum has to a large extent been substituted by palladium, with consequent cost savings – palladium is about one quarter the price of platinum or gold. Nanostellar, a USA-based company, is pursuing this application in a gold-platinum-palladium catalyst that reduces emissions by 40% in comparison with a normal diesel catalyst.
Jewellery accounts for 57% of available gold. The main drivers are price, design and speed to market, although there is a global dichotomy with higher caratage investment jewellery in Asian cultures and lower caratage required for adornment jewellery in Japan and the West.
Further information: MinSouth