Friday, 30 May 2014

Gold Miners' Value Destruction Cycle - Citibank - High Grading ?

Barron's report that Citibank's Global Goldbook warns against the gold miners, even at depressed levels, as they are destroying value through high-grading mines, also a contention of Brent Cook's, (although he sees it as longer term bullish for the juniors with quality deposits).
However as reported by PI Financial's Digging the Dirt there is analysis which shows production grades in line with reserve grades. It would be interesting to dig further.
Certainly a mine by mine analysis like PI's graphs is important. At a company level the average grade can be adjusted by scaling up and down individual mines' production with the most appropriate economics for the current gold price, while this questions the longer term furtures of the higher cost and lower grade mines it does not change each mine's economics.
PI note that Barrick and Newmont's production does indicate some high grading.
We should also consider that as gold prices fall and miners take write-downs and reduce reserves of their marginal mines the reserve grade will increase into line with production grade.

Thursday, 29 May 2014

Improving Productivity in Mining

Whilst this is a promo article from a software company there are some interesting perspectives from Dundee Precious Metals and Anglogold on how far behind the curve the mining industry is against the lean manufacturing and process control improvements that manufacturers have followed for many years. Basic data capture, controls and visualisation are key. This attention to detail will improve unit costs in a sustainable way which contrasts with simply high-grading mines. For such an incredibly capital intensive industry the focus on operational excellence seems to have been lacking.

Hong Kong Precious Metals Summit

Hong Kong Show May 29th / 30th
Webcasts should follow
Precious metals summits tend to include smaller more speculative companies than the Denver group shows.
Companies - below

Sunday, 25 May 2014

Notes from European Gold Forum 2014 - Winter

Discussion HERE specifically relating to Teranga Gold but also some general views.
(Paid site discussing more companies' European Gold forum presentations HERE (early/mid May-14 articles)
Investors have become used to looking at outdated PEA / PFS studies with a view that gold prices have come down and development over-spends have proved costs have gone up.
This may be changing, though of course investors must always be wary of feasibility study, and especially PEA, assumptions.
The juniors which advanced most strongly in early 2014 and since pulled back are interesting to maintain on close watch for renewed strength. From Winter -

  • Emerging producers with a bent for expansion have been severely marked down.
  • the market is now pricing them as if the execution and cost overrun risk is extreme and the prospect for takeovers of these emerging deposits is nil
  • There are some very, very compelling execution lift (de-risking) situations
  • The gold optionality, or call premium, on these deposits is also virtually nil
  • Time and time again during this forum, presenters state that the feasibility studies used were often done several years ago and that costs have since come down.
  • Gold Standard Ventures, for example, indicated that drilling costs are down 50-60%
  • Typically, mine plans for the companies on which I am focused have been tweaked to be more scalable starting with smaller capex and simpler designs so as to avoid the high profile development hazards
  • The common quote is, “We have good flexibility,” and that it’s a “good time to build a scaleable mine” in terms of labor and material.

John Kaiser Presentations

Some recent presentations by John Kaiser, a range of items, including these, are free to read after a time.

Saturday, 24 May 2014

Accounting in Mining

PWC 2012          PDF
PWC "Basics" 2010
KPMG 2012 Survey
CPA Canada
Ernst & Young 2013 "Good Mining"
Deloitte 2007 - Traps & Pitfalls
Deloitte 2003 - Financial Reporting in Global Mining - although out of date highlights some of the key conceptual issues

  • Although its mineral reserves are arguably the most 
  • valuable asset of a mining company, they do not appear 
  • as an asset on the balance sheet except to the extent 
  • they were purchased. Even then, the cost of mineral 
  • reserves is often not disclosed separately from other 
  • mining-related fixed assets.
  • Assets should not be carried on the balance sheet at an amount in excess of their recoverable amount. The measurement and recognition of asset impairment is an important issue in the mining industry
  • Producing Gold & Silver Mines - CruGroup

    Lists of Mines by Country making up 75% of Global production included in Cru Group Cost Curve Analyses

    Gold Aug-2013             Gold Ongoing
    Silver 2013                   Silver Ongoing
    Copper 2013
    Uranium 2013

    Wednesday, 21 May 2014

    Junior Gold Mining M&A - Rio Alto bids $300m for Sulliden in Peru

    Rio Alto(RIO.TO) today proposed the acquisition of Sulliden (30 miles from Rio Alto's La Arena) for $300m to create a larger Peru based Gold miner developing Sulliden's Shahuindo Gold project (2.4m oz M&I, 1.6m Inferred).
    Sulliden had a $24m investment from Agnico Eagle in April 2013 last year, amongst a series of Agnico junior investments, (see here ). Sulliden is one of Stan Bharti's Forbes & Manhatten companies.

    Sulliden's 2012 Feasibility Study indicated a staged development with low initial capex around $130m
    Raymond James on the 2012 Feasibility Study
    Sulliden's PDAC presentation

    Sunday, 18 May 2014

    Leading Economies at PP Parity

    World Bank Assessment of the World's largest economies at Purchasing Power Parity released a couple of weeks ago.
    The six largest middle income economies – China, India, Russia, Brazil, Indonesia and Mexico – account for 32.3 percent of world GDP, whereas the 6 largest high income economies – United States, Japan, Germany, France, United Kingdom, and Italy – account for 32.9 percent.

    Fractional Reserve Banking

    Martin Wolf of the FT on the Monetary System
    Discussion by Cullen Roche at Pragcap

    Thursday, 15 May 2014

    RIU Resources Roundup Conference - Sydney 2014

    Continuing the Aussie Mining theme,  RIU Resources Roundup Sydney
    Programme & Companies

    Australian Mine Sites

    Reading more about the short life assets acquired by Northern star, with the intent to extend mine life through exploration after buying the operating assets cheaply, I came across an interesting site covering all Australian natural resource operations - MiningOilGas
    Gold mine operations -----

    Wednesday, 14 May 2014

    Gold Mining M&A - Northern Star Acquires Jundee Mine from Newmont - Targets 550k oz pa

    Northern Star (NST.AU)  have been extremely active in Australia this year rolling up cast off mines from Barrick and now Newmont with the purchase of the Jundee Mine for AU$ 82.5m.
    Now slated to become Australias second largest producer after Newcrest with 550koz for 2015 from a current 350k oz.

    Tuesday, 6 May 2014

    Are Gold Miners High-Grading Mines?

    CEO .ca links to PI Financial's April-14 "Digging Through the Dirt" which suggest that mined grade is in line with reserve grades. This would indicate that, over a sample of 130 mines, companies have not yet been high grading and sterilising their deposits, as suggested by Brent Cook for one.

    Saturday, 3 May 2014

    West African Gold - Cote D'Ivoire Mining Code

    Plenty of "he would wouldn't he" but here Mark Bristow of Randgold, who seems to have had more success than others in negotiating gold mines with African regimes, including a stake in the recent 600k oz pa Kibali mine in DRC, discusses Cote D'Ivoire's new mining code. Also discussion at Piercepoints
    Of course a mining code cannot settle risks from civil war.
     There is enormous potential for gold mining in particular in Cote d’Ivoire which has some of the largest potentially gold-bearing greenstone formations in West Africa and is attracting enormous attention from gold explorers and miners with several mines now operating and some advanced very good sized gold exploration and development projects.........Indeed there have been suggestions that Cote d’Ivoire has the geological potential to become the largest gold mining nation in West Africa, even exceeding that of Ghana.