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Tough year ahead for NZ gold production
Ross Louthean — 13 January 2014 There are a lot of uncertainties as the two large New Zealand hard-rock gold miners and the private and boutique alluvial gold producers wage their war on costs in 2014 – all feeling there won’t be a dramatic increase in the $US-denominated gold price.
The spotlight was shone on the tough year ahead by OceanaGold Corporation (ASX, TSX & NZX: OGC) announcing last week a cutback of at least 106 people, followed suit by mining machinery services supplier Goughs, and union claims since that as many as 200 people will go from the Macraes gold operations.
Prior to this scenario, OceanaGold had said it would mothball the Globe-Progress open cut mine by mid 2015 unless the gold price reached about $NZ2,000/ounce by about now. It is a long way from that target.
Less publicised workforce cutbacks have taken place at the Waihi operations of Newmont Waihi Gold which is part of the Newmont Mining group which has undertaken some slashing and burning on global operations like other international gold majors. However, the Waihi pruning has been less severe than elsewhere, including Newmont’s big Australian operations saddled with high wages and material costs.
The challenge for gold in New Zealand is how much money will go into exploration – because both OceanaGold and Newmont Waihi have been honing this activity. For Newmont, the 2014 driver will be development of the new Correnso underground mine near the Martha open cut. The company’s regional quest in the Hauraki goldfield on the WKP project with Glass Earth Gold Ltd (TSX-V & NZAX: GEL) may depend on Glass Earth’s ability to raise fresh capital to pay its way and perhaps also take over management of WKP.
Like many other gold juniors looking at NZ, Glass Earth Gold has been working on narrow funds and may be hoping to raise a lot more capital in 2014.
Glass Earth has dropped or sold most if not all its South Island permits and also has the Neavesville gold project, also in the Hauraki goldfield, with the support of mining identity Geoff Loudon
Loudon’s L&M Group has the Earnscleugh alluvial gold dredge near Alexandra in Otago which had its fair share of headaches in being profitable in 2013, not helped by the gold price heading south and the dredge spending some time at the bottom of its pond.
One new gold miner is the Wakaia Gold syndicate’s new operation on the Wakaia River near Gore and, like many South Island alluvial operations, would undoubtedly be lean and mean.
One of the great hopes for 2014 is MOD Resources Ltd (ASX: MOD) which is earning up to 80% of the Sams Creek gold project near Takaka from OceanaGold and also owns 100% the extended target in that field.
More could be heard from MOD early this week on the level of activity it will undertake to lift the reserves at Sams Creek well above the existing 1 million ounce level, and also what other targets it will drill in the area this year.
New Zealand Petroleum & Minerals (NZP&M) is pushing for new gold exploration areas to be taken up in the Taupo Volcanic Belt and while there are juicy epithermal targets in this region, the climate for grass roots exploration is not looking good right now.
The perception was not be helped by respected Canadian mining newspaper Northern Miner running a headline last week indicating market interest in OceanaGold’s Didpio gold-copper project in the Philippines which, thanks to the copper by-product has low to negative operating costs.
That paper cited North American investors being impressed with the Didipio performance and with the severe cut-back on workers and operating costs in New Zealand – suggesting that NZ may now be a diminishing option for the company.
Such a scenario would be grim for NZ as the Macraes mining operation has for more than two decades been a major mining mainstay for the country, and an economic mainstay for Otago which has been losing industry and employment elsewhere in the past year.
What the gold sector wants to see is an improvement in the gold price, some bold new faces on the scene (also requiring the NZP&M to lift its ponderous permitting process) and for the Kiwi dollar to ease back.
The $A has taken a pounding in the last six months and this has been one of the few bright lights for mineral and metal exports from that country. The Kiwi, on the other hand, has not lost ground against the Greenback and has risen sharply against the $A in recent months.
A general election is on the horizon for New Zealand and the well being of mining and also petroleum exploration will hinge on whether the Nationals retain power. A change to Labour with perhaps a Green Party alliance would help bring the Kiwi dollar down but could make New Zealand a poorer place for resource investment.