Spike in gold prices spurs increased production
Gold has played a vital role in the history of Australia. With Australian gold prices hitting an all-time high this year, the precious metal seems poised to be key in the near-term future. On the heels of a decade of growth, investors who are wary that a recession must be coming are placing their bets on gold. In anticipation, many companies are starting new mining projects and committing more resources to existing ones.
Ramping up Production
With gold prices approaching $2,000 per ounce, OZ Minerals has lengthened the life of its Prominent Hill operation in South Australia to 2030, with gold processing trials taking place this year. OZ’s Carrapateena mine, also in SA, will go up to a capacity for producing 67,000 ounces of gold annually.
Northern Star Resources sold more than 150,000 ounces of gold produced at its Australian operations in the last quarter of 2018. Executive Chairman Bill Beament sees good reason to invest in the metal now. “It’s a no-brainer — the leverage to an increasing gold price is so much larger for equities compared to bullion itself,” Beament told Bloomberg. “There’s also now a genuine choice of high-quality gold companies outside of the majors, and it is certainly an option if you want to park money — we’ve shown that the returns can be pretty spectacular.”
Just as it is helping with other exports, the weak Australian dollar is boosting gold prices. This has prompted ECR Minerals to acquire 1,600 square kilometres in the Yilgarn region of Western Australia for gold exploration. “It looks like very prospective territory,” Craig Brown, ECR’s chief executive, told Proactive Investors. “Everybody regards Western Australia as a very promising area to work in” because of the prominence of Archean greenstone belts that commonly host rich gold deposits.
Gold Road and Gruyere Mining Co. are set for production beginning next quarter at a new mine in WA’s Yamarna region after the first ore was mined in January. Rising gold prices have also prompted Tyranna Resources to increase its production this year, with production at its Eureka and Jumbuck gold projects in WA and SA, respectively. Newcrest Mining had record production at Cadia Valley in New South Wales in 2018 and is poised for a big 2019 as well.
If the economy does take a turn for the worse, gold figures are going to be a safe haven. “Gold responds to global financial risk and so, if you believe that, the best way to play gold is with these gold stocks,” Joe Foster of Van Eck International Investors Gold Fund told Bloomberg. “They carry leverage to gold and in a good gold market, they will outperform.”
How Gold Made Australia
Gold helped build Australia, especially the gold rush of 1851. Though there had been a few scattered finds before 1851, government officials were wary of a loss of control that could result from putting convicts to work in gold fields. When they saw the riches that resulted from the California gold rush, however, government officials changed their tune. That, plus the economic depression caused by the loss of colonists who had gone to California to seek their fortunes, spurred offers of reward from NSW Governor Charles FitzRoy to anyone finding gold.
Edward Hargraves was among those who had left for California. He didn’t get rich there, but upon his return to Australia in 1851, he and his team discovered gold at the Ophir site near Bathurst. Hargraves won a £10,000 reward — which he refused to share with his team — and set off a series of rushes across the country that saw Australia’s population go from 430,000 in 1851 to 1.7 million two decades later. The boom attracted new residents from all over the world and helped shape Australian national identity.
“It’s a huge and exciting story — one of the biggest events in Australian History, with some fabulous character and it was an event that probably changed Australia more than any other. It shaped much of what we are today,” businessman and author of “Gold — the Fever that Forever Changed Australia,” told the ABC in 2010. “There’s just something about gold. Why people would subject themselves to such extraordinary hardship and extreme risk, and defy all advice and press on?”
With gold prices sky-high and a discovery last year by RNC Minerals at its Beta Hunt Mine near Kambalda, WA, that yielded $15 million worth of high-grade gold in a week, the love affair between Australia and the lucrative gold mining industry seems as though it will only grow deeper.