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Feature: Gold Rush 2.0: Australia to Become World’s Biggest Gold Producer

By Shae Russell, Chief Editor, The Daily Reckoning Australia

Published on June 10, 2020

SHAE RUSSELL is the chief editor of The Daily Reckoning Australia, where she breaks down global macro-economic trends for Australians, and is Fat Tail Media’s leading analyst on bullion and precious metal miners.

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The price of gold is starting to stretch its legs. But years of underinvestment in both exploration and mine expansion mean that many miners around the world are at risk of having little left to dig up. When the gold price falls, exploration is the first thing to go from the budget. Yet it can take a decade or more to turn a gold find into a gold mine.

Rising prices mean we’re prepared to pay top dollar for precious metals. But globally, gold miners didn’t build their resources when the price was low. By underinvesting in exploration, they’ve hurt future production and are missing out on a once-a-century opportunity.

Next year, Australia will be the world’s largest gold producer, producing an estimated 383 tonnes of gold, and will knock China off the top spot it’s held since 2007.1

One estimate for the Middle Kingdom says that growth will be stagnant over the next decade, suggesting that Russia will overtake the country and bump it all the way down to number three.

Australia didn’t become number one by accident though. Currency parity with the US dollar back in 2010–11 meant some gold miners were losing money. This brief moment, when one Aussie dollar was worth more than one greenback, forced Australian gold miners to become lean producers. Not only did Aussie gold miners cut the bloat from the budget, they streamlined processes to produce more gold for less cost.

ONE OF THE UNIQUE FEATURES OF THE AUSTRALIA’S GOLD MINING INDUSTRY IS THAT EVERY SINGLE STATE HAS GOLD RESERVES AND IS ACTIVELY MINING GOLD.

Australia’s gold exports, 2010–20

Source: Gold Industry Group

GOLD-RICH

Australia’s 17% of economically demonstrated resources (EDR) is 5.6 times higher than China’s 3%. In fact, Australia’s gold reserves are larger than in Russia or South Africa. Australia’s known gold deposits are even larger than the US and Canada’s reserves combined.

The stories of how gold mining emerged in Australia pretty much involves stumbling upon the shiny rock: a nugget was found in a riverbed in a place called Poverty Point. Once word of this nugget spread, the 1850s gold rush began. On the west coast in the 1890s, a horse kicked over a rock and gold was found. This very spot went on to house Australia’s longest running gold mine, pouring gold for 120 years.

The ease of finding gold has much to do with Australia hitting the geological jackpot. We are literally peppered with gold deposits. Some places have richer gold plots than others. One of the unique features of the Australia’s gold mining industry is that every single state has gold reserves and is actively mining gold.

Western Australia has about 43% of economically demonstrated resources (EDR), yet this state produces a mammoth 70% of the country’s total gold. While Western Australian is famous for its Super Pit (a joint venture between Saracen Holdings and Northern Star), it is only Australia’s second biggest producer of gold.

Top spot goes to Boddington (Newmont Corp), which is located 120 kilometres from Perth and pours a whopping 741,000 ounces of gold per year on average. Newmont Corp owns another big gold producer in in the Northern Territory (4% of EDR) – the Tanami mine, which produces 500,000 ounces annually.

Major gold deposits in Australia

Source: Geoscience Australia

However the biggest gold miner by ounces is the copper gold porphyry Cadia mine operated by Newcrest Mining in New South Wales (18% of EDR), which sent some 871,216 ounces to market last year. Newcrest is out to make Cadia an even bigger miner, increasing production from less than 28 tonnes (900,000 troy ounces) of gold in 2019, to a mammoth 35 tonnes (1,125,000 ounces of gold) of gold by 2023.

Head a little further south and you’ll find one of the richest gold mines in the world.

The Fosterville mine (Kirkland Lake Gold) is the largest gold producer in Victoria (1% of EDR), pouring 619,366 ounces in 2019. While it doesn’t produce as much as others, the transformation at Fosterville is reviving the Victorian gold mining industry.

Fosterville is smack in the guts of the first Australian gold rush. By simply digging deeper, Fosterville has become one of the highest gold grade mines in the world, with an average grade of 39.6 grams per tonne.

EXPLORATION CRUCIAL FOR SUCCESS

Mining is an odd business. Your greatest asset is a depleting one. An ounce out of the ground is an ounce out of the ground. In spite of how important it is to secure a future resource, exploration is the first thing to go when the price of gold dives.

SUCCESSFUL EXPLORATION TODAY MEANS INCREASED GOLD PRODUCTION A DECADE FROM NOW.

Global exploration expenditures peaked when the gold price hit an all-time high, as the price fell so did the money spent looking for it. This short-sighted thinking from miners hinders future production. Successful exploration today means increased gold production a decade from now.

Aussie miners are in an enviable position right now. The weakening Aussie dollar is pushing the Aussie dollar gold price up. Higher prices not only encourage increased production, but creates an incentive to spend big and go looking for more.

As it stands, Australia is one few gold producers with exploration spending back to 2012 levels. Nevertheless, it has to be this way as gold is becoming increasingly harder to find.

The last tier 1 or giant discovery in Australia was the Tropicana deposit in 2005. However, Australia isn’t alone – giant discoveries of almost any commodity are almost non-existent. There are two reasons for this: lack of spending on exploration and having to look harder. The easy gold at the surface has been found.

Australia, and many other gold producing nations, must spend more money than ever before to find gold. To ensure efficiency, exploration programs will need to be carefully targeted. “Nearology” may be successful for existing mines. Yet greenfield sites will need extensive geophysics before any drilling can begin.

This will be expensive, but once again luck strikes Australia. Here the average depth from surface for a discovery is quite low. The average depth for a brownfield site in the Lucky Country is just 299 metres, compared to the US, where it is 415 metres.

THERE HAS BEEN A PERSISTENT UNDERINVESTMENT AND MISINVESTMENT IN GOLD EXPLORATION AROUND THE WORLD.

Global gold exploration expenditures 1975–2020

Source: MinEx Consulting

Global outlook: Number of discoveries correlate with exploration spending

Source: MinEx Consulting

It is a similar story for greenfield sites. A new find in Australia is on average only 30 metres from the surface and in the US the average greenfield site begins another 10 metres on top of that.2

High gold prices encourage deeper exploration, but perhaps this isn’t the answer to securing more gold. Technology advances can drastically alter commercial viability of a mine. The next giant discovery may not come from exploration, rather a change in what’s an economical project.

Carbon in pulp processing was a revolution for American gold miners in the 1970s, and as a result was commonplace in Australian mining by the 1980s. This was a game-changer for the industry. Low gold grade deposits could now be processed. This technology not only transformed what could be mined, it set Australia up to become the dominant supplier of gold it is today.3

There has been a persistent underinvestment and misinvestment in gold exploration around the world. Australia has been well prospected, but not well explored. Higher gold prices and technology advancement could see Aussie gold miners prosper well into the 2020s.

Notes

1
Department of Industry, Science, Energy and Resources, Commonwealth of Australia. Resources and Energy Quarterly (March 2020).
2
Gold Industry Group, “The Future Looks Bright for Gold” (October 2019) retrieved from: https://www.goldindustrygroup.com.au/news/2019/10/8/req-report-the-future-looks-bright-for-gold.
3
Bill McKay, Ian Lambert and Shige Miyazaki. “The Australian Mining Industry: From Settlement to 2000”, Australian Mining Industry, 1998-99 (Australian Bureau of Statistics, cat. no. 8414.0).

SHAE RUSSELL is the chief editor of The Daily Reckoning Australia, where she breaks down global macro-economic trends for Australians, and is Fat Tail Media’s leading analyst on bullion and precious metal miners.

* This article was published in partnership with The Daily Reckoning Australia

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Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

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Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

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Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

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Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

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Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

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Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

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Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.