21/05/2017 08:16 AST
From Canada’s Yukon to southern Patagonia, outbreaks of gold-rush fever are popping up as bullion markets stage a tentative recovery.
The number of holes drilled at gold deposits has been rising steadily for more than a year, according to S&P Global Market Intelligence.
And while early-stage exploration budgets haven’t kept pace with spending at existing mines, prospecting hot spots are starting to pop up in traditional destinations Canada, Australia and Latin America.
In some parts of Argentina, exploration has jumped about 50%, mainly for lithium but also for gold in provinces such as Santa Cruz, according to state-controlled energy company YPF. Chile’s government also sees a pickup this year with prospectors focusing on both copper and gold. Colombia is also attracting more attention.
Drilling successes are adding to the interest. Aurion Resources shares have more than tripled since February 1 when it announced a discovery in northern Finland, while SolGold has risen 12-fold in the past year as it drilled out a copper and gold find in Ecuador. This week’s $431mn deal between Eldorado Gold Corp and Integra Gold Corp is the latest acquisition driven by a need to secure new ounces.
“We need more exploration in the industry; it’s been such a long downturn,” Mark Ferguson, head of mining studies at S&P Global Market Intelligence, said in a phone interview from Halifax, Nova Scotia.
“A lot of producers are going to start facing medium-term shortfalls in their pipeline if they’re not replacing the reserves that they’re actively mining.”
Producers cut project spending as prices retreated from a 2011 peak, focusing instead on reducing debt and tapping the richest pockets of gold in their mines for the lowest possible costs.
As prices fell toward $1,000 an ounce in 2015, the World Gold Council warned that the industry was nearing “peak gold,” after which output would begin to fall for the first time since 2008.
Ferguson believes output still has room to creep higher this year and next but says it’s inevitable that by 2019, the legacy of years of reduced exploration and capital spending will be falling global supply.
Still, he expects producers will continue to tread cautiously while addressing shrinking production pipelines, with exploration budgets only marginally higher in 2017, at best.
The spike in global gold drilling activity was helped by last year’s surge in prices above $1,300. But with this year’s average closer to $1,234, the industry has yet to see a sustained surge in exploration financing.
“We have a good month in financing and then we have just an OK month,” Ferguson said. “In my mind there are a lot of questions in terms of how sustainable the investment is, and how that’s going to translate into budgets.”
With competition for exploration dollars still stiff, countries with weak exchange rates have an advantage. And Canada, even though it’s a mature mining market, remains under- explored given its lack of infrastructure.
“The North still remains one of those frontiers for mining,” Eira Thomas, renowned Canadian geologist and prospector said in a recent interview. “Places like Yukon, the Northwest Territories and Nunavut will continue to attract exploration dollars going forward as the market for commodities hopefully improves.” Thomas was chief executive officer of Kaminak Gold Corp last year when it was snapped up by Goldcorp for just over $400mn. Vancouver-based Goldcorp made the acquisition to access Kaminak’s Coffee deposit south of the Dawson City in Yukon.
Since then, rivals Barrick Gold Corp and Newmont Mining Corp have acquired exploration stakes in the Yukon, as has Agnico Eagle Mines. Although these are comparatively small, all three companies are seeking to replenish their pipelines through a combination of fresh exploration and spending at existing operations.
On Thursday, Kinross Gold Corp made a new move in the Yukon, sel
Gulf Times
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