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EDITORIAL

Aussies yet to

bring home the

by Dominic Piper
(Canadian) bacon
by Dominic Piper

by Dominic Piper he last three months has seen Australian gold’s fascination with North America
Tcontinue with Newcrest Mining Ltd, Silver Lake Resources Ltd and Northern Star
Resources Ltd all striking deals of various sizes on the continent.
The trend – sparked by Northern Star’s acquisition of the Pogo gold mine in Alaska in 2018 – is hardly surprising. Canada and the US are
major gold producers and well-regarded Tier 1 jurisdictions from a political risk perspective. There is also a gaping hole in the region’s gold
sector between the majors of Barrick Gold Corp and Newmont Corp and the smaller intermediate and junior miners. The last gold bust
decimated the mid-tier ranks on the TSX, a situation which still hasn’t been rectified with gold stocks struggling to pull out of their malaise.
It is a very different trajectory to that which Australia’s gold sector has followed in recent years. That divergence allowed the likes of
Newcrest, Northern Star, Evolution Mining Ltd and St Barbara Ltd to take advantage, using their strong cash flow, comparative valuations
and robust balance sheets to acquire struggling operators and undercapitalised assets across the continent.
However, for all the headlines generated from this Aussie invasion, the purchases are yet to deliver a return for their new owners.
The bullish Australians – many of them flush with confidence having turned around struggling North American-owned assets in their own
backyard – headed to North America intent on applying a bit of Aussie smarts to bring operations into profit.
It has so far failed to materialise.
When Northern Star acquired Pogo, it had just produced 271,273oz @ AISC of $US882/oz for 2017. The September 2021 quarter saw just
43,992oz gold sold at an AISC of $US1,751/oz.
Newcrest has battled to keep costs down at Red Chris, although its future appears brighter following release of a positive PFS for a move
to a block cave mining method at the gold-copper mine.
Red Lake has similarly taken time to show itself as an accretive acquisition for Evolution. When it paid $US375million (with an additional
$US100million payable upon new resource discovery) for the asset two years ago, Evolution executive chairman Jake Klein told GMJ the
company was giving itself three years to hit 200,000 ozpa at $US1,000/oz AISC. By the September 2021 quarter, that target still appeared
some way off with production of 23,768oz @ AISC of $2,697/oz for the period.
Meanwhile, underperformance at the Atlantic operations has seen St Barbara post a $248 million impairment for FY21 following a
downgrade from 100,000-110,000oz to 65,000-80,000oz for the period.
We now await how the next round of acquisitions and investments – Newcrest’s takeover of Pretium Resources Inc, Silver Lake’s move into
Harte Gold Inc and Northern Star’s agreement with Osisko Mining Inc – plays out.
All of which makes it surprising that not one of the ASX-listed mid-tier gold miners have looked to the hottest gold district in the world
currently, West Africa.
As the GMJ awards coverage in this issue shows, the region boasts both operational and exploration success stories.
Ironically, the mid-tier companies to have taken biggest advantage of West Africa’s prominence are TSX-listed, with B2Gold Corp and
Endeavour Mining Corp (dual-listed in London) growing their value on the back of West African operations.
These companies – as well as Australians such as Perseus Mining Ltd and the 2021 GMJ Miner of the Year West African Resources
(WAF) Ltd – have shown that while political risk may be higher, the underexplored nature of the region means West Africa’s geological risk
is much lower, with an abundance of untapped near-surface, multimillion ounce prospects still to be developed. And, with cost structures
the envy of peers operating in Tier 1 jurisdictions, the likes of Endeavour, B2Gold, Perseus and WAF have maintained margins through
difficult times.
If Australian miners put aside their fear of geopolitical risk, they will find a region where the geology is similar to WA – meaning Australian exploration
and mining skills are more applicable than they are in North America – and companies who are still trading with an “African discount” attached.

dominic@paydirt.com.au @Paydirt_Media @paydirtmedia @PaydirtMediaAustralia

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