Gold

Content maintained by Mike Huleatt

• Gold
• Resources
• Accessible EDR
• JORC Reserves
• Exploration
• Production
• World Ranking
• Industry Developments

Very strong gold prices throughout 2007 supported substantial growth in exploration spending. Production remained virtually unchanged in 2007 but is expected to increase slightly in 2007. Exploration continued to generate a large number of intersections of economic significance justifying further work. The announcement of an initial resource estimate of 4 mozs for the Tropicana project in WA was a highlight for the year.

Gold has a range of uses but the two principal applications are as an investment instrument and in the manufacture of jewellery. Secondary uses in terms of the amount of gold consumed are in electronic and dental applications.

Australia's gold resources occur and are mined in all States and the NT. At the end of 2007, total Australian gold resources were 212 t higher than at the end of 2006. After allowing for the replacement of those resources lost to production (246 t) newly delineated resources added to the national inventory totalled 458 t (14.7 mozs) in 2007.

Australia's EDR rose by 358 t (11.5 mozs) in 2007 to 5839 t and accounted for 81% of total demonstrated resources, a similar proportion to 2006. In 2007, EDR increased in NSW, Tas and SA. WA, with 2850 t, continued to dominate EDR with 49% of the national total compared to 54% in 2006. Western Australia's reduced share was caused by the combined impact of lower total EDR in the State and increased EDR in SA.

Subeconomic demonstrated resources rose by 17 t in 2007 with increases in both paramarginal demonstrated resources and submarginal demonstrated resources. Resources in the paramarginal category rose by 7 t to 1272 t with 72% of total paramarginal resources occurring in WA. The submarginal demonstrated resources rose by 10 t to 138 t, just under half of which was in WA.

Inferred resources fell by 163 t to 4336 t. WA (43%) and SA (26%) dominate inferred resources.

EDR for gold are essentially unencumbered (less than 1% is in any form of restricted area). At Australia's 2007 rate of production, EDR is sufficient for about 24 years. If, however, resources classified only as reserves under the JORC Code are considered, they will support only 13 years at the 2007 production rate. This is slightly lower than the 2006 reserve:production ratio. These are average figures and there are some operations which may continue after these periods and there are others that will close before the end of those periods. These figures continue to highlight the need for ongoing successful exploration in both the short and medium terms.

EDR is the sum of the JORC Code reserves categories plus those resources from the measured and indicated resource categories assessed by Geoscience Australia as likely to be economic. In 2007, just under 56% of EDR fell into the JORC reserves.

On the basis of calendar year exploration spending reported by ABS, gold remained the dominant single commodity target in 2007 but its share of total spending fell sharply again from 29% in 2006 to 24% in 2007 as spending on base metals, iron ore and uranium grew strongly. This fall occurred despite a 17% increase in exploration expenditure to $502.9 million. WA continued to dominate gold exploration by attracting $296.3 million ($36.6 million more than in 2006). However, its share of total gold exploration fell slightly to 59%. All other regions, except the Australian Capital Territory, had gold exploration during the year and encouraging results were reported from them.

It should be noted that ABS data reported on above will not include exploration for copper-gold mineralisation where the explorer nominates copper as the principal commodity. Such expenditure will be reported as exploration for copper.

On a financial year basis, the ABS reported gold exploration spending for 2006-07 was $455.8 million, an increase of $56.1 million over 2005-06.

Data published by the Canadian company Metals Economics Group (MEG) on company exploration budgets for non-ferrous minerals indicates that intended budgets for gold exploration in Australia for 2007 totalled US$460.5 million (A$569 million based on the exchange rate used by MEG). This budget was about 12% higher than actual spending reported by the ABS. The differences between reported budgets and actual spending on gold exploration may in part have been caused by the rapid increase in base metals exploration resulting in gold budgets being reduced as additional funds were directed to base metals.

The MEG data show that 47% of gold exploration budgets were expected to be directed at grassroots exploration compared to 33% in 2006 which suggests there may be a trend toward earlier stage gold exploration. The shares of both minesite and late stage gold exploration budgets reported by MEG fell in 2007 to 23% for minesite exploration (33% in 2006) and 30% for late stage exploration (34% in 2006).

New gold resources were reported for many deposits across the country. The more substantial included:

• The announcement of an initial resource at the Tropicana project (AngloGold Ashanti, 70% and manager and Independence Group, 30%). An open-cut resource of 62.8 Mt @ 2.0 g/t Au for 4.05 mozs of gold was reported for the Tropicana-Havana mineralisation. This resource occurs at the junction of the Yilgarn Craton and the Fraser Range Mobile Belt in WA and may represent the first deposit in a new gold province.
• BHP Billiton Pty Ltd reported a 77% increase in resource tonnage its Olympic Dam deposit in the Gawler Craton, SA. Ongoing drilling and geological interpretation allowed a resource estimate to be prepared which put total resources in the deposit at 7738 Mt @ 0.87% Cu, 0.29 kg/t U₃O₈, 0.30 g/t Au and 1.61 g/t Ag and a separate gold only resource of 117 Mt @ 1.19 g/t Au. Included in the resource is a combined proved and probable reserve estimated by the company at 399 Mt @ 1.87% Cu, 0.58 kg/t U₃O₈, 0.68 g/t Au and 4.0 g/t Ag.

New gold mineralisation was found across the continent and at depth below known deposits in a variety of mineralisation styles. The Archaean greenstones of WA's Yilgarn Craton remain a very favourable target but substantial opportunities exist in other provinces. A major review of the highlights of gold exploration in Australia in 2007 is available in the document Australian Mineral Exploration: A Review of Exploration for the Year 2007 - Extended Edition available for download from the Geoscience Australia web site. Indicative of drill intersections reported from across the country in 2007 and the first half of 2008 indicate potential, with further exploration, to yield resources to underpin the Australian gold sector into the medium to longer term. Indicative of these are:

• Alkane Exploration Ltd's Caloma prospect (NSW) where intersections included 4 m @ 14.00 g/t Au, 3 m @ 5.54 g/t Au and 7 m @ 9.12 g/t Au.
• Avoca Resources Ltd's exploration near Higginsville (WA) yielded a shallow gold resource under about 20 m of clay cover on the Wills Prospect in an area of no previous drilling or evidence of historical workings.
• At Tunkillia (SA) drilling by Minotaur Exploration Ltd in parts of the Area 223 deposit continued to yield good intersections including 10 m @ 8.3 g/t Au, 3 m @ 16.2 g/t Au and 9 m @ 4.1 g/t Au, all from the oxide zone.
• GBS Gold International Inc. continued to report encouraging intersections from drilling in the Chinese Big Pit zone (NT) including 11 m @ 35.7 g/t Au, 13 m @ 4.8 g/t Au and 4 m @ 4.6 g/t Au.

Australian gold production reported by ABARE for 2007 was 246 t, a similar level to 2006. Australia's largest producer in 2007 was the Telfer operation in WA where 0.62 mozs (19 t) was produced. Telfer was followed by the Super Pit at Kalgoorlie where production was almost 0.61 mozs (18.9 t) and Sunrise Dam which produced 0.60 mozs (18.7 t). In 2007, WA dominated Australian production with 155 t, just under two-thirds of total Australian output (Table 1).

Source: ABARE Australian Commodity Statistics 2006 and ABARE Australian Mineral Statistic December Quarter 2007

Table 1. Australian gold production 2003 to 2007.

The USGS estimate of world gold reserves of 42,000 t was similar to 2006 According to the USGS, South Africa still has the world's largest reserve of gold at 6000 t (14.3%), similar to 2006. According to the USGS Australia has the second largest reserve with approximately 12% of the world's holdings.

World mine production in 2007 fell slightly to 2,476 t. A major change in world rankings occurred in 2007 as China replaced South Africa as the world's leading gold producer. China produced about 281 t in 2007, followed by South Africa with 270 t and Australia with 246 t.

A limited review of developments is available in the document Australian Mineral Exploration: A Review of Exploration for the Year 2007 - Extended Edition available for download from the Geoscience Australia web site. For a more comprehensive discussion of project development the ABARE report Minerals and Energy - major development projects - October 2007 listing is available for download from the ABARE website.

Some of the major developments are:

• Boddington (Newmont 66.67%; AngloGold Ashanti 33.33%) in WA where milling is expected to start in late 2008 or early 2009 and production over the first five years is expected to average around 1 mozs/yr. Average annual production over the current 15 year life of mine will be around 850,000 oz of gold and 30,000 t of copper. Development at Boddington is over 70% completed.
• Ballarat East (Vic) where Lihir Gold's current plan is to produce, on average, 200,000 oz/yr over a 20 year mine life with initial production expected from late in 2008.
• Development of Oxiana Ltd's Prominent Hill (SA) project is progressing with the first ore expected to be processed late in 2008 to yield 10,000 t copper and 6000 oz gold for the year. Production for 2009 is expected to 110,000 - 120,000 t of copper and 75,000 - 85,000 oz of gold.
• At Higginsville (WA) Avoca Resources' treatment plant was on schedule for completion and commissioning by the end of June 2008. The plant is expected to start processing high grade feed from Trident in July with an output of 170,000 oz in 2009-10.
• Newcrest Mining Ltd expects to achieve full production from its Ridgeway Deeps gold-copper development at its Cadia project in NSW in 2010-11. In the next two years mining will be in transition from the current Ridgeway underground mine to Ridgeway Deeps from which the company expects to produce some 1.6 mozs gold and 0.21 Mt copper over a mine life of 12 years