GOLD

OUTLOOK
Inside gold’s
project pipeline

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 GOLD OUTLOOK | CREDITS

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2 April 2021

Gold projects needed
Lack of investment in early
stage projects coming
home to roost
Though the first half of the year has
been dominated by talk of vaccines,
the post-COVID-19 recovery and a
buoyancy in industrial metals
markets not seen for a decade,
precious metals promoters have not
broken stride.
With gold prices ticking back up above US$1,900/oz,
they remain upbeat about the effects of further doses
of stimulus, inflation and negative real rates.
Higher gold prices since the summer of 2020 have
already sparked a wave of corporate activity, and with
prospects good for the gold sector over the short-to-
mid-term, we thought it wise to take a closer look at
future gold supply.
That the project development pipeline is not brimming
with top quality assets will come as a surprise to few
within the industry, especially given the lack of
exploration dollars dispensed by the majors in recent
years, but the relative lack of meaningfully sized
projects to have reached the feasibility study stage still
came as a bit of shock.
INTRODUCTION | GOLD OUTLOOK
In the Americas, we identified 19 projects at the
feasibility stage in the hands of junior miners,
representing 36.6Moz of aggregate potential
production, some 3.2Moz of potential annual gold
production and US$6.3 billion of initial capital
expenditure. Of these, two have been acquired and
four appear to be going nowhere fast, leaving just 13
across both continents.
But it was in Africa where the lack of investment really
showed: there are just seven FS-stage projects in
development, and two of them - Cardinal’s Namdini
and Resolute’s Bibiani - have already being acquired,
both by China-based companies.
The information contained in this report was initially
published earlier in the year, so the status of some
projects may have changed since then, but the central
message is clear: a surge in supply any time soon is
unlikely
“The lack of meaningfully
sized projects at the
feasibility study stage
came as a bit of shock.”
Mining Journal, Tom Hoskyns
3
 GOLD OUTLOOK | SRK
Remembering the lessons
from the last gold bull
market
In a cyclical industry such as
gold mining, it seems simple to
practice the concept of “buy low,
sell high.”
However, it always seems that M&A activity in the gold
sector mirrors the gold price, peaking when prices are
highest. Of course, buying low is not as simple as it sounds
as when gold is in a bear market, cash flow tightens, debt
financing becomes harder to obtain and conservatism
creeps into strategic forecasts. When gold enters a bull
market and companies have the money and motivation to
acquire new assets, M&A roars back to life.
With gold potentially at the early stages of a bull market,
now is a good time to revisit the mistakes of the previous
bull market a decade ago. More often than not, deals done
during that bull run crippled companies in the recent bear
run, with estimates of at least $85 billion in write-downs
after the last bull market, according to research from
Paulson and Co.
The industry clearly learnt some lessons from the mistakes
of the last bull run. Costs are down, profit margins are up
and M&A in the past five to six years has generally been
value accretive.
Now, with the gold price elevated again, the question is
whether this forced discipline of the past half-decade can
be sustained or whether the constant need to replenish
reserves, coupled with the exuberance inherent in bull
4 May 2021
markets, will cause the past to be repeated. We can look to
the errors of 2010-12 for indicators that the industry’s new-
found discipline has been lost.
Indicator 1: Targeting volume over quality
In the last boom, assets with minimal historic value were
suddenly being snapped up for hundreds of millions and in
some cases billions of dollars. These were typically assets
with large resource bases but low grades and high
operating or capital costs (and often all three combined)
that rendered them worthless at $1,200-1,300/oz gold
prices but economic at $1,700-$1,800/oz. In short, the only
thing they had going for them was that large resource base
that stretched the definition of “reasonable prospects for
economic extraction”. It is not a bad thing to pay $1 billion
for an asset when prices are high, even if you know that the
value of the asset will fall to $500 million in your bearish
scenario – especially if it has a long mine life.
There is no such thing as a deal with a guaranteed positive
return in all scenarios and, because gold is cyclical, the asset
will again increase in value when the gold price inevitably
rises. However, it is an error to pay $1 billion for an asset
whose value goes to zero when times are tough or, worse,
hemorrhages cash instead of repaying back the debt taken
on to acquire that asset.
The bottom line is that project evaluation should always
include robust scenario planning. All scenarios don’t need to
show a positive return. However, in your worst-case outlook,
if the projected short-term fall in value hurts, but is

manageable, debt can still be serviced and mining can
continue to at least break-even, that is very different from a
mine going significantly cash flow negative with only a
minor drop in gold price.
Indicator 2: Undervaluing qualitative risk
Good projects receive premiums for a reason. If a project is
technically good but still carries a discount in a bull market,
there is very good reason for it (often social or political risk).
When big deals start getting done in jurisdictions where it is
near-impossible to permit, and especially when these are
greenfield projects, this is a good indicator that discipline
has vanished.
Quantifying technical risk is usually relatively
straightforward. As a hypothetical, a geologist could analyse
a resource estimate and conclude that the grade is
materially overstated. With a quick remodel and updated
mine plan fed into an economic model, you now have new
cash flows to derive your value. Even the most-optimistic
CEO would find it difficult to argue against a revised risk-
adjusted scenario based on quantitative analysis.
On the other hand, it is much more difficult to adjust value
for qualitative risk. Let’s say an asset is worth $1 billion in a
jurisdiction with a clearly defined and executed permitting
process. In a more-complex jurisdiction where at best you’re
looking at several years of delays, or worse, you have a
binary risk situation (i.e., it may never be permitted), setting
a risk adjusted value is very subjective. Should that same
project be valued at $900 million, $500 million, $1 million?
This is a much more arbitrary decision and in an optimistic
market, applying a minimal qualitative discount can result
in the perception that a mythical Tier 1 asset is available for
a steal. In the middle of a downturn when valuations are
low, a roll of the dice on a few million dollars for a high-risk,
high-reward project may be a good investment. But when
valuations for very risky projects (especially those with
binary risk) run into the hundreds of millions or more, this is
one area where it pays to be conservative.
Indicator 3: Extreme extrapolation of
resource potential
Returning to the challenge of finding rational value in a bull
market, another common approach has been for
prospective buyers to target exploration upside for that
value. Upside should never be ignored when evaluating a
mining project, and there have been instances where this
strategy has been successful, even in a bull market.
However, it is another matter to pay a significant premium
for potential upside without a robust thesis to underpin
your upside expectation.
May 2021
SRK | GOLD OUTLOOK
This is why it is critical to involve an appropriately
knowledgeable geologist in the evaluation of resource
upside and a mining engineer to evaluate if any of that
upside has any potential to be economic.
In a large porphyry deposit that is simply undrilled at depth,
it can be easy to argue that significantly more value is
present versus defined.
For other deposit types, even numerous gold intercepts in
the region may not be anything more than interesting
mineralisation with no chance of economic extraction.
Therefore, application of a probability of success to go with
hypothetical extended mine plans is key to appropriately
valuing exploration upside.
Conclusion
Everything in mining involves probabilities: the probability
of the gold being in the ground, the probability of being
able to extract the gold at a certain price, the probability of
moving a drill to point B and striking the same mineralised
system you hit at point A.
When companies begin referring to their best possible
outcomes to justify the prices paid for assets, that is when
we will know that we have returned to the levels of
exuberance that plagued the industry in the last bull
market. Only one thing has to go wrong for the best-case
scenario to turn into your worst nightmare.
For those that are in the position of evaluating the
opportunities and making the decision as to what is most
likely to bring value to shareholders, the bottom line is to
maintain discipline, keep in mind the lessons of the past and
not just due your due diligence, but do it properly. Often
times, passing on a deal is the best move, but knowing
when a good deal is in front of you and being able to move
quickly is just as important.
Author: John Pfahl, Principal Consultant (Corporate
Advisory), SRK Consulting
SRK – at a glance
Contact
John Pfahl, Principal Consultant (Corporate Advisory) Rocio
Ramirez, Senior Marketing Advisor
Tel: +1 604 681 4196
Email: info@srk.com
Web: www.srk.com
5
 GOLD OUTLOOK | ALTO METALS
Alto emerging on song
at Sandstone
Well-funded Alto Metals is
hitting its stride this year as it
begins to better demonstrate
the potential of its district-scale
Sandstone gold project in
Western Australia.
It’s already discovered two new lodes in 2021 at the
previously-mined project, with its biggest drilling
programme in years underway and starting to test the
untapped potential.
What makes Alto unique for a junior is its control of virtually
an entire underexplored greenstone belt in a gold-class
address.
Alto recently acquired another tenement to take its
holdings in the Murchison to more than 900sq.km, covering
the majority of the Sandstone Greenstone Belt and in a
region surrounded by multimillion-ounce gold mines such
as Gold Fields’ circa 10Moz Agnew to the east and Ramelius
Resources’ 6Moz Mt Magnet to the west.
Sandstone itself has previously produced more than 1Moz
from shallow oxide pits and historical underground
workings and the project has seen little exploration below
100m. Alto last year increased its Lord Nelson resource by
60% to 109,000oz, taking the project’s total to 331,000oz
across several deposits, all of which remain open, but
6 May 2021
managing director Matthew Bowles has his sights set on a
much larger update within the next 12 months or so.
With about A$7.8M in cash, the company now has two rigs
at work on a 30,000m campaign and a strong news flow is
anticipated.
The explorer has emerged from what Bowles described as a
challenging year, with the company seeing off not one but
three unsolicited takeover offers, raising $5.5 million and
receiving strong shareholder support for its major
exploration programme designed to prove up a bigger
resource base. What we did last year was build foundations
for what I think 2021 is going to be, an exceptional year,” he
told RESOURCEStocks.
Exploration is focused on resource growth and making more
discoveries, like the Orion lode which Alto found towards
the end of last year, 200m south of Lord Nelson.
“That’s delivered some fantastic results,” Bowles said.
“The highlight for me was 29m at 3.5g/t gold from 49m.”
Other results at Orion included 23m at 3.8g/t gold from
106m.
“Orion was a key catalyst for us and highlighted that there’s
a lot more potential to be found at the Lords Corridor,”
Bowles said.
The corridor spans over 3km between the previously-mined
Lord Nelson and Lord Henry deposits.

“As one of the geos
Wide-spaced “step out” exploration drilling in December,
1km south of the Lord Nelson pit, confirmed the discovery
of a New Zone of gold mineralisation, where assays included
4m at 5.3g/t gold from 124m.
This news followed the discovery in February of another
new lode 400m to the south on the edge of an undrilled IP
anomaly, where assays included 8m at 1.6g/t gold from 65m
and 1m at 6.1g/t gold from 222m within a broad “halo” of
mineralisation.
Bowles said the mineralisation was the same as at Lord
Nelson and reminded Alto of the first few holes which led to
the Orion discovery, which further indicated the significant
potential of the corridor and the entire Sandstone Gold
Project.
“We’re introducing the bigger picture of how big the
corridor will be and then we’re starting to look at other
targets, because we’ve got multiple targets over the
property,” he said.
Back at Lord Nelson, which had produced 207,000oz of gold
at 4.6g/t gold from a pit mined to about 90m, Alto has
previously reported high grades at depth, including 5m at
13g/t from 99m and 16m at 5.2g/t gold from 240m in
primary mineralisation.
Exploration results are imminent from ongoing exploration at Alto Metals’ Sandstone gold project
May 2021
ALTO METALS | GOLD OUTLOOK
said: the more we drill,
the more we find.”
Results below Lord Henry have included 2m at 51.3g/t from
70m.
“The mineralisation doesn’t just stop at the bottom of the
old pits, we’re now looking into the continuation of
mineralisation down plunge and along strike,” Bowles said.
The cashed-up company is expanding the team as
exploration heats up.
“My geological team are the happiest I’ve seen them in a
long time because they can actually go out and
systematically test a number of targets they have wanted to
drill for such a long time,” Bowles said.
He joined Alto as a director in 2019 and has been at the
helm since mid-2020, saying he had long thought of
Sandstone as an amazing asset.
“I just see so much potential,” he said.
7
 GOLD OUTLOOK | ALTO METALS

“There’s still so much to be found at Sandstone and we are

still only just scratching the surface, but our results are
indicating the presence of a much bigger system.

Gold jurisdiction
Not only is Western Australia a mining-friendly jurisdiction,
with the government recently providing Alto with
exploration incentive funding, but the isolated state has also
been fairly insulated from COVID-19.

The only impact Alto is noticing, along with other industry

members, is the skills and people shortage due to border
closures.

In Alto’s case this meant a slight delay in securing a drill

crew last year, and the current backlog of assay results.

The current drilling programme began in February and

Bowles expects results to start flowing in April.

From there, momentum is expected to build. Alto Metals MD Matthew Bowles

“We’re looking forward to seeing the results when they

come through from a number of different targets,” Bowles “2021 is an exciting year ahead for us and shareholders have
said. a lot to look forward to,” Bowles said.

“We’re quietly very excited to see what that’s going to
reveal.”
Meanwhile Alto has already conducted preliminary
metallurgical testwork on samples from Lord Nelson, which
provided an average gold recovery of 96%.
“We are in the strongest position we’ve ever been in, we are
well funded and have a major drilling programme underway
to follow up recent high-grade drilling results, drive further
resource growth and make further discoveries.”

Along with plus-92% recoveries from earlier testwork on Alto Metals – at a glance
other deposits including the Vanguard and Indomitable
Camps, Alto said the results demonstrated the Head Office
mineralisation was amenable to conventional cyanide Suite 9, 12-14 Thelma St,
extraction methods. West Perth WA 6005
Bowles said the results gave investors comfort around the Tel: +61 8 9381 2808
metallurgy so Alto could continue its current focus on Email: admin@altometals.com.au
exploration.
Web: www.altometals.com.au
The company has strong backing from its key shareholders,
Directors
and is tightly held with the top five holding about 48%.
Richard Monti, Matthew Bowles, Terry Wheeler, Dr Jingbin
The current exploration programme is about one-third Wang
complete and Bowles said there was already planning
Shares on Issue
underway for an expansion. The first rig is testing depth
450 million
extensions at Lord Henry, Lord Nelson and the Orion lode,
and will then remain in the Lords Corridor to further test the Market CAP (at March 23, 2021)
New Zone and IP target not yet drilled. A$34 million
The second rig has started step-out drilling at Vanguard and Major Shareholders
will then move on to a maiden drill programme at the Windsong Valley (18.42%), G S Group Australia (11.14%),
Chance target, before moving back to follow-up on first Middle Island Resources (8.89%), National Nominees (5.36%,
phase results in the Lords Corridor. Sinotech (Hong Kong) (4.12%)

8 May 2021
 GOLD OUTLOOK

Global gold
M&A set to
take off? A look
at FS-stage
Americas
candidates
Buoyant precious metals While capital discipline continues to be a mantra in many
boardrooms, recent M&A has featured synergies as a key

prices and the rollout of rationale behind transactions involing companies seeking
opportunities to further pare back costs and increase

COVID-19 vaccines means margins.

Consolidation has also been a theme with growth-

that 2021 has begun with orientated companies seeking to increase their relevance
and access to finance at cheaper rates as their market
an air of expectation for capitalisation increases.

the realisation of pent-up As part of its Global Gold 2021 series of reports, Mining-
Journal.com is exploring the relatively finite universe of

merger and acquisition

development stage projects with the aim of identifying
which projects are most likely to advance into production
and these are most likely to be M&A candidates.
activity as corporate We start here with an examination of feasibility stage
teams will be able to projects in the Americas.

resume due diligence

Mining-Journal.com has identified 19 feasibility stage
projects in the Americas in the hands of junior miners,
representing some 36.6Moz of aggregate potential
site visits. production, some 3.2Moz of potential annual gold
production and US$6.3 billion of initial capital expenditure.

The projects have an average capital efficiency of $168/oz,

Much of the M&A in 2020 involved projects in
neighbourhoods where the acquirers were already
operating, but with many producers seeing record output in
2020, the need to replace depleted ounces is becoming
more urgent, and the strong cash flows from high gold
prices means many companies have the treasuries to
support M&A action.
average all-in sustaining cost of $706/oz, and an average
after-tax internal rate of return of 29% at an average $1,351/
oz gold price. Of the eight projects in Canada, nine in Latin
America and two in the US, two have already been acquired,
four will be developed by their current owners and four are
going nowhere fast.
Top of the reserves list are Horne 5 (6.1Moz), Hardrock

May 2021 9
 GOLD OUTLOOK
(5.5Moz) and Stibnite (4.8Moz). In terms of grade, Cerro
Blanco (8.5 grams per tonne), Grassy Mountain (6.8g/t) and
Back River (6.3g/t) head the list. The costliest projects to
develop are Stibnite ($1.3 billion), Hardrock ($952 million)
and Horne 5 ($740 million) with the least capital efficient
projects being Stibnite ($286.2 million/oz), Grassy Mountain
($259.3 million/oz) and Lynn Lake ($226.1 million/oz).
The lowest AISC is Horne 5 at $399/oz, followed by Camino
Rojo at $543/oz and Cerro Blanco at $579/oz. At the other
end of the scale, Fenix comes in at $1,042/oz. Camino Rojo
has the highest IRR of 62% although it uses the highest gold
reference price of $1,600/oz, followed by Premier with 51%
at $1,400/oz and Bateman with 50.3% at $1,525/oz. So much
for the numbers, but which projects are likely to be built or
acquired?
Six of these projects (Hardrock, Premier, Cerro Blanco,
Magino, Wasamac and Mara Rosa) are already under
construction, have received a positive construction decision
or are under acquisition, representing 12.4Moz of aggregate
production or 34.2% of the total, and potentially adding
some 1.1Moz/y of production.
For all of them, 2020 was key.
Ascot Resources closed a US$105 million project financing
package in December to build Premier, Argonaut Gold
approved construction of Magino in October and secured
up to $175 million in debt financing, Orla Mining received
an environmental permit to build Camino Rojo in August,
while Bluestone Resources has moved into construction of
Cerro Blanco and raised much of the money to build it, as
did Amarillo Gold which raised C$57.2 million to build Mara
Rosa.
The need to replace depleting ounces in the global gold space is becoming more urgent. Image: Premier Gold
10
Two of the five projects are already subject to acquisitions,
Monarch Gold announcing the sale of Wasamac to Yamana
Gold in November followed by Equinox Gold announcing
the acquisition of Premier Gold in December.
Both Cerro Blanco and Premier are high-grade deposits with
respective reserve grades of 8.49g/t and 5.99g/t. Premier is
being acquired - will Cerro Blanco be next?
The main strike against Cerro Blanco is that it is in
Guatemala, a country with a recent history of mines being
developed and then shut down as a result of community
opposition. Tahoe Resources’ Escobal silver mine was
shuttered in 2017 and subsequently sold to Pan American
Silver, while in 2019 Guatemala’s Constitutional Court
ordered the closure of the Fenix nickel mine operated by
Swiss chemical company Solvay.
The Lundin group is a major shareholder of Bluestone. It is
also a major shareholder of Lundin Gold which operates the
Fruta del Norte mine in Ecuador, which was once considered
a troubled project.
Lundin Gold has shown it has a higher geopolitical risk
tolerance than many other companies and as it plans on
expanding beyond a single asset eventually, with few high-
grade projects out there, Cerro Blanco could be a good fit.
It could take the diversification route into a large low-grade
operation that Kirkland Lake Mines took with its November
2019 acquisition of Detour Gold.
Hardrock is the most expensive development project with a
capex of $952 million, while the others are comfortably
under $500 million.
Hardrock ranks second in terms of capital efficiency at $190/
May 2021
 GOLD OUTLOOK

oz of production after Premier at $134/oz. The other three

projects come in around $200/oz. Premier and Cerro Blanco “Midas Gold’s
lead the IRR ranking at 51% and 34%, respectively, with
Magino and Wasamac the most marginal projects with IRRs
Stibnite project in
of less than 20%.
Idaho, USA,is
Several gold developers have updated their economic
studies recently to take into account the higher gold price
another project
environment. As many of the feasibility studies have
whose technical
aspects reduce
reference gold prices in the $1,200-1,300/oz range, it is
evident that project economics across the board will have

the field of
improved at current prices turning what were perhaps
marginal projects into more viable propositions. As such,
this will also indicate which projects have greater leverage
to the higher gold price environment. potential suitors”
Orla Mining’s Camino Rojo indicates the impact of updating
the reference gold price with a January 2021 feasibility
been very active on the M&A front such as the September
update, which extended the mine life, increased the
2019 acquisition of Barkerville Gold Mines by OGR, and the
reserves and boosted the estimated after-tax net present
various consolidation plays executed by O3 Mining in 2019
value to $452 million at a 5% discount rate with an after-tax
to build a commanding land position in the Abitibi gold
internal rate of return of 62% at a gold price of $1,600/oz
district of Quebec.
compared with a NPV of $142 million and IRR of 58.7% at a
gold price of $1,250/oz in the 2019 feasibility study. From the list of 17 feasibility projects, four (Mara Rosa,
Grassy Mountain, Bateman and Ollachea) with annual
Alamos Gold’s Lynn Lake project in Manitoba, Canada,
production of less than 80,000oz/y are too small to elicit big
would be a candidate to be dropped due to its 12.5% IRR,
company interest, although they are profitable to exploit on
which is below the 15% IRR rule of thumb commonly
paper and may be of interest to smaller consolidators.
utilised for gold investment projects, albeit this was at a
Together these projects represent aggregate production of
$1,250/oz reference gold price. Its feasibility gave a 21.5%
2.6Moz, some 7.2% of the total. Of the other feasibility
IRR and more than doubled its NPV at $1,500/oz gold, and
projects, Sabina Gold and Silver’s Back River in Nunavut is
so this a project with leverage to higher gold prices, and
arguably the most remote and presents unique challenges
unsurprisingly Alamos is permitting the project.
due to its Arctic location limiting the number of companies
Falco Resources’ Horne 5 in the Abitibi region of Quebec, potentially interested in it.
Canada, is also at the low end of the IRR scale at 15.3%, but
However, the January announcement that Agnico Eagle
it has a reference price of $1,300/oz, which puts it in a
Mines intends to expand its footprint in Nunavut via the
similar position as Lynn Lake.
acquisition of TMAC Resources’ Hope Bay mine arguably
In October 2020, the company entered into an agreement puts it at the top of the list for potential suitors for Back
with Glencore to process copper and zinc concentrates at its River.
nearby Horne smelter and Falco expects to obtain all
With Chinese gold companies effectively scared away by the
necessary permits, authorisation and financing to initiate
Canadian regulators’ rejection of Shandong Gold’s earlier
construction in the second half of 2021.
bid for TMAC, other potential bidders could be scared off by
That being the case, and with reserves of more than 6.1Moz Agnico increasing its presence in Nunavut on the grounds
and annual production of 340,000oz/y in a very well-known that Agnico has the greatest possibility of unlocking cost
neighbourhood, Horne 5 has a leading candidate for being savings and synergies than any other company, or
acquired. homefield advantage if you prefer.

To this end, a leading candidate is Osisko Development (OD) However, expanding and rightsizing Hope Bay is not going
which was created by Osisko Gold Royalties (OGR) in to be an easy task as Agnico chair and CEO Sean Boyd
November 2020 with the objective of becoming the next acknowledged and so the gold major may not be in any
mid-tier gold producer. hurry to expand further in the territory.

As part of its creation, OGR transferred its 18.3% ownership In this instance to those with experience of refractory ore
position in Falcon to OD. The Osisko group has historically processing and/or the facilities to do so. This makes Nevada

May 2021 11
 GOLD OUTLOOK
Gold Mines (NGM) joint venture the leading possible suitor
due to its autoclave and roaster facilities at Goldstrike in
Nevada, to the south, particularly as JV operator Barrick
Gold already has an ownership position in the junior.
However, if NGM were to make a move it would most likely
be before Stibnite is built as the plan includes the
construction of a standalone pressure oxidisation (POX) on
site, capital which NGM could view as an obvious synergy.
However, there could be a twist in this tale as just prior to
releasing its feasibility in December 2020, a management
and board transition under the auspices of major
shareholder Paulson & Co was announced with long-time
president and CEO Stephen Quinn exiting the company.
Is Paulson perhaps looking to build a significant gold
company?
Finally there are the projects whose road to development is
less certain: Ixataca, Montagne d’Or, Volta Grada and Loma
Larga and are therefore cannot be seen as contenders for
development or takeover until particular issues have been
resolved.
These projects represent 10.3Moz of aggregate production
potential, or 28.4% of the total. Interestingly, these four
projects number within the six most capital efficient
projects. The company with the steepest hill to climb
is Almaden Minerals, whose environmental permit
application for its Ixtaca project in Mexico was rejected in
December 2020.
Brazil is not a jurisdiction to everyone’s taste, though
successful gold producers such as Yamana Gold and more
recently Equinox Gold have thrived there.
It has been a long, long road to development for Midas Gold at
Stibnite in Idaho, USA
12
Volta Grande in Para is the largest undeveloped gold
deposit in Brazil and while Belo Sun has obtained an
environmental licence and construction licence its plans
were stopped when an injunction was placed on its
construction license in 2017 (subsequently upheld by
Brazil’s Federal Court of Appeals) until an indigenous study
is updated. The company completed and submitted the
study in early 2020 which included a consultation process
with indigenous communities and Belo Sun is currently in
the process of responding to an information clarification
request from indigenous agency FUNAI.
Montagne d’Or is a joint venture between Orea Mining
(44.99%) and private Russian gold producer Nordgold
(55.01%) in French Guiana, which is part of France and
subject to French law and permitting requirements.
The company has several steps yet to navigate including
renewing its mining concession, which the government has
yet to do despite a December 2020 court ruling ordering it
to do so within six months. The JV also has to submit studies
for project improvements and modifications, navigate a
French mining code reform and submit mining and
environmental authorisations and construction permit
applications. Fortunately for Orea, it incurs no expenditures
until all permits to commence construction are granted.
INV Metals is progressing through permitting for its Loma
Larga project in Ecuador, which has been designated a
project of national interest. It has received an industrial
water use permit and is in the environmental permitting
process with the Ministry of the Environment and Water, the
most significant permit required. However, the project has
faced community opposition in the past including attempts
to hold a referendum to ban metallic mining in the region it
operates in.
The company has responded by working to reduce the
footprint of its proposed site and relocating some facilities
to less sensitive areas. With the company having to
undertake a consultation process, opposition could raise its
head again.
This analysis shows there is a finite universe of feasibility
stage projects in the Americas, with the better-quality
projects already in development or subject to acquisition.
The increase in precious metals prices has converted what
were marginal projects into realistic development
opportunities with some of the best leverage to higher
gold prices.
As such, we expect more companies to update their
economic studies and run the numbers at a $1,600/oz gold
price. The review also shows there are a good handful of
projects getting bogged down at the permitting stage,
particularly in Latin America.
May 2021

WMX resetting the base
for new Wiluna future
Big gold inventories guarantee
their owners exposure to the
metal’s inevitable highs, as well
as the lows, hence they usually
form part of the portfolios of
large companies.
Wiluna Mining Corp (ASX: WMX), looking to build a
significant, profitable gold factory on a world class resource
at Wiluna in the middle of Western Australia, is not a large
company today.
But executive chairman Milan Jerkovic says it has the
platform to propel it into the mid-tier space populated by
other Yilgarn leaders that have emerged in the past decade.
“I’ve built enough mines,” the veteran industry leader says.
“There is no shortage of gold here.
“You can’t over-capitalise Wiluna, but you can go too hard
for a small company and blow up in the process.
“When Wiluna has been successful in small patches in the
past, there has been about 90,000m of drilling done every
year to convert compliant resources into reserves, and
they’ve been successful.
“As soon as they dropped off on their drilling, and finished
off [mine plan reserves], they fell off the perch – every time.
May 2021
WILUNA MINING | GOLD
GOLD OUTLOOK
OUTLOOK
“Our geologists have done a fantastic job so far. We
exceeded peoples’ expectations with the reserve update
reported after the drilling we did last year. But Wiluna is still
in development as a geological story.
“Mining engineers like to have something absolute to build
on [geological certainty]. So that is where we must get that
shorter term and long-term balance right. We will stay very
focused on our plan for the next 18 months to maximise
cash flow while we build the stage-one production up. That
means developing and mining ore that gives us the best
return for the money we spend on mine and stope
development.
“At the same time we will continue to work on resource-to-
reserve conversion, and on demonstrating the geological
scale we all believe is there at Wiluna, while we also work on
the long-term mining and processing options.”
Wiluna has yielded about four million ounces of gold over
decades of refractory sulphide, and free-milling oxide and
sulphide ore extraction from a nest of openpit and
underground workings near the small Wiluna township in
WA’s north eastern goldfields.
With current resources of circa 7Moz, it ranks among the
biggest regional endowments on Yilgarn belts – Wiluna,
Kalgoorlie and Laverton – containing about 240Moz.
To the east is Northern Star Resources’ 15Moz Yandal gold
hub, including regional jewel, Jundee, that the new
Australian major sees as a long-term, 400,000ozpa producer.
13
 GOLD OUTLOOK | WILUNA MINING

“We’re de-risking
Jerkovic believes Wiluna, with its two-stage plan to reach
250,000ozpa in the next few years, can underpin WMX’s rise

and fundamentally
in the same way Jundee has been a core driver of Northern
Star’s ascent.

While a fundamental difference between the two expansive changing the story at
Wiluna and it will take
gold systems is Wiluna’s dominant refractory component –
which has drawn in Russia’s Polymetal as a buyer of

time for that to be fully

concentrate from a plant under construction now at Wiluna
– Jerkovic notes the vast volumes of the world’s mined gold
is coming from refractory centres in the US, Russia and
elsewhere, and says future production in WA, from the acknowledged,
Yilgarn and Pilbara, will drive heavy new industry
investment in pressure-oxidation processing capacity and
particularly here in
also renewable energy at some stage.
Australia.”
“Our current endowment and what is outlined [in mineral
resources] is shallow compared to Jundee at sub-600m,”
“Jundee’s average grade at the moment is 3-3.5gpt. All we
Jerkovic says.“Geologically, structurally, I have no doubt
need to do is maintain an average grade above 5gpt to
Wiluna is bigger than Jundee – with wider orebodies, and
more than account for that refractory component.
the potential along strike and at depth [for continuation and
repetition of the same, bulkier host structures]. “Jundee is a great orebody, but it has narrower, quartz-reef
style deposits – similar to Bellevue in a lot of ways – and
“We are waiting for modelling of a 2D seismic survey and
they’re having to go and chase them along a lot of working
the results, I think, will surprise people and start to
fronts. We won’t have to do anywhere near the amount of
demonstrate the true scale of the Wiluna system.
development per stope tonne, or stope ounce.
“That needs to be truth-tested with drilling, of course, but I
“It’s expensive in our current stage-one planning because
think it will lead us to do a 5km-by-5km 3D seismic survey
we’re still drilling out a lot of ounces around and between
later this year that will really point to the continuity of these
existing and planned development infrastructure.
structures [containing the gold] at Wiluna and the scale of
the [camp]. “But Wiluna will have by the end of this year a 10-year solid
plan based on reserves and very high-level resources, with a
cost structure fully defined, and the development cost per
ounce and the stoping dollars per ounce defined to a
feasibility level.

WMX is putting to bed new funding for its stage-one

production growth from 50,000-60,000ozpa to 120,000ozpa
(in FY22), including offshore equity and debt support,
mainly from Europe.

The company is looking at tapping what it sees as a deeper

pool of available institutional and retail equity investment,
via a London main board listing, when the timing is right
after laying the groundwork for a dual listing over the past
six months.

About A$150 million of current capex and stage-one

ramp-up costs (with some stage-two spend) can be lined up
against the new funding and projected operational cash
flows through to mid-2022, with the latter supported by
gold hedging at more than A$2,600/oz.

WMX has also entered into a long-term “alliance” with major

global underground mining contractor and engineering
group, Byrnecut, which brings not only the best

14 May 2021
 WILUNA MINING | GOLD OUTLOOK

underground workforce and fleet to Wiluna, but also deep

mine planning, engineering and underground infrastructure
(including paste fill system) expertise.

“What we’re doing now, for the first time, is putting together
a solid 18-month plan that focuses on cash flow, and that
encompasses introducing sulphides when the concentrator
is available,” Jerkovic says.

“We’re not worrying about exactly how much of either

material we’re producing gold from – maximising cash flow
is the aim. We’ll worry about how much steady-state
concentrate we can sell to the two offtake parties once
we’ve maximised cash flow at the site.

“We’re ramping up underground production from 10,000

tonnes per month to 20,000tpm in the next three months,
over three working levels, including the [high-grade, non-
refractory] Golden Age sulphide deposit.

“There was a belief that once we’d commissioned the
concentrator Golden Age had to stop, but it doesn’t have to
because whatever comes out as gravity gold can stay on site
and we can actually batch process through the CIL plant, or
in fact, whatever doesn’t come out via gravity gold and
doesn’t leach we can put through the concentrator; it’s a
sulphide, it’s just not refractory.
“So that’s a small part of the overall plan [750,000t per
annum underground production], but it wasn’t in the initial
plan and it can supplement what we’re doing with this
stage-one sulphide production.
between now and the end of the September quarter.
Achieving that high average grade and tonnage intensity
for the infrastructure in place is where our focus needs to
stay while we continue to build out the bigger picture at
Wiluna.
“The past owners did these declines that followed high-
grade shoots down past 1km depth and when we first
started here everybody was saying the same thing: let’s go
and do that. But that’s been, and is, a recipe for disaster.
“We are doing this differently.”

“The concentrator is on schedule and we will be

commissioning in October. Then the ramp-up will take Wiluna – at a glance
about 12 months, when we will move from the [budgeted]
56,000oz this year, to 120,000ozpa. Head Office
“That [production level] could be 20-30% free gold at that Level 3, 1 Altona St, West Perth,
point, whether from gravity recovery on site, or Wiltails, and WA 6005
we will just produce and sell concentrate at a level that Tel: +61 8 6322 6418
helps maximise our cash flow.
Email: jmalone@wilunamining.com.au
“The biggest thing that’s going to improve our margin on Web: www.wilunamining.com.au
our initial plan is grade, and intensity of stoping tonnes for
the development we’re doing. Directors
Milan Jerkovic, Tony James, Greg FitzGerald, Neil Meadows,
“If we stay focused for the next five years on the Happy Jack Sara Kelly
and Bulletin areas [lodes/workings, including the new Essex,
and Golden Age orebodies] – which is where we’re saying, Shares on Issue
conservatively, we’re going to add 500,000oz of reserves at 119 million
5gpt, at less than $30/oz, by the end of this year – we are
Market CAP (at March 23, 2021)
going to be in a position to produce a lot of gold at the right
A$120 million
cost.
Major Shareholders
“There are currently seven rigs [including three
Delphi (25.6%), Sparta AG (8.3%), Franklin Templeton (4.9%),
underground] drilling all this out. We’re going to try to put
UBS (London) (4.4%), Maple Rock (4.4%)
out drilling results, in this top 600m, twice a quarter

May 2021 15
 GOLD OUTLOOK

A look inside
the Americas
gold PFS-stage
project
cupboard

While more numerous In terms of grade, the leaders are Copperstone (6.8 grams
per tonne), Romero (4.9g/t) and Bradshaw (4.8/t).

than the feasibility stage The costliest projects to develop are KSM ($5 billion),
Metates ($3.5 billion) and Livengood ($1.8 billion) with the
projects covered in the least capital efficient projects being Livengood ($270/oz),
Lobo Marte ($221.1/oz) and Metates ($212.6/oz). The lowest
first article in this series AISC is Romero at $595/oz, followed by Gramalote at $648/
oz and Springpole at $645/oz.
PFS-stage projects still At the other end of the scale San Francisco is $1,204/oz,

represent a finite universe Fenix $997/oz and Livengood $976/oz. Hasbrouck has the
highest IRR of 43% followed by South Railroad and

of quality ventures
Copperstone with 40%. So much for the numbers, but
which projects are likely to be built or acquired?

moving towards The projects at PFS stage represent a mixed bag of

development opportunities: 12 projects feature production
development. of more than 80,000oz a year, with five at about 300,000oz/y
or above.

Five have capex of around $1 billion or more and four are

Mining Journal has identified 18 PFS-stage projects in the decidedly marginal with IRR in single digits and two that
Americas in the hands of junior miners, representing some don’t even have an IRR!
83Moz of aggregate potential production, some 3.4Moz of
Poor IRR removes Metates, KSM, San Francisco and
potential annual gold production, and US$14.7 billion of
Livengood from consideration as development possibilities
initial capital expenditure, an average capital efficiency of
or acquisition targets, although, as noted in the previous
$141.8/oz, average AISC of $787.7/oz, and IRR of 23.53%.
article, metals prices are considerably higher now than the
There are nine projects in Latin America, five in Canada $1,250-1,400/oz reference prices used in their studies.
and four in the US. In summary: two projects have already
These are marginal projects with room for improvement and
been taken over, five look set to be developed by their
have maximum leverage to higher gold prices. That said, a
current owners, and six are going nowhere fast. Top of the
negative net present value at Livengood and negative cash
reserves list are KSM (38.8Moz), Metates (18.3Moz) and Lobo
flows at San Francisco are non-starters under their current
Marte (6.4Moz).

16 May 2021

project concepts. Metates and KSM (Kerr, Sulphurets,
Mitchell) have large-scale production potential but are
hampered by excessive initial capital requirements of $3.5
billion and $5 billion, respectively, which, economics aside,
make them challenging projects to finance.
Chesapeake Gold has a market cap of C$257 million and
Seabridge C$1.9 billion.
In a market where the gold majors continue to exercise
capital discipline projects with such capex would be
challenging even with amazing economics.
Cognisant of this fact, Chesapeake Gold entered into an
agreement to acquire private mining technology company
Alderley Gold in December 2020 to gain access to an
innovative precious metals processing technology which
may create a path towards a low-cost sulphide heap leach
development for its Metates gold-silver-zinc deposit in
Durango, Mexico.
KSM in British Columbia, Canada, may be the world’s largest
undeveloped project by gold resources but Seabridge Gold
has also looked to pivot through the $100 million
acquisition of the nearby Snowfield deposit in late 2020.
Snowfield has a measured and indicated resource of
25.9Moz and 9Moz inferred, plus copper, and is expected to
enhance KSM project economics.
Seabridge is working on an updated PFS to incorporate
Snowfield into the KSM mine plan, which could bring
higher-grade gold into the initial phase of mining, extend
the years KSM produces over 1Moz/y of gold and potentially
postpone the capital-intensive development of the Iron Cap
and Deep Kerr block caves until much later.
The PFS stage projects have an aggregate IRR of 29.4%,
compared with the 29% average for the feasibility stage
projects, with the five standouts being Hasbrouck (43%),
Copperstone (40%), South Railroad (40%), Valentine (36%)
and Blackwater (34.8%), which are all in either Canada or the
USA. Blackwater leads the pack in the context of this article
as it was acquired in 2020 by Artemis Gold for C$190 million
as a foundational asset for the company, which was spun
out of Atlantic Gold when it was acquired by St Barbera
in 2019.
With 9.5Moz of resources, Blackwater promises to be a long-
life asset with production of 248,000oz/y for 23 years
following a $592 million initial investment.
With a market cap of C$775 million, Artemis would be tough
to acquire for cash, especially since major gold producers
have only recently got their balance sheets in order
following their excesses of the previous gold cycle. It is
questionable whether investor appetite for large
transactions exists yet.
May 2021
GOLD OUTLOOK
“In the past, Gold
Standard’s market
cap has been as high
as C$600 million
which would have
deterred many
potential suitors, but
now at $210 million
that is no longer
the case”
Marathon Gold’s Valentine project in Newfoundland is a
clear acquisition target with its promise to produce
145,000oz/y for 12 years following a $196 million initial
investment. The company is looking to break ground by
year end with a feasibility study to be completed in the first
quarter, with project financing and permitting expected to
follow mid-year.
ASX-listed St Barbara bought Atlantic Gold for C$722 million
as it brought its Moose River mine in Nova Scotia into
production, so will history repeat itself?
Gold Standard Ventures’ Railroad project promises higher
production compared to Valentine at 156,000oz/y, but for
only eight years.
The project is in Nevada and has a reasonable initial capital
of $133 million. The project has been at an advanced stage
for quite some time and is on the Carlin trend which one
would think would make it a sure thing for acquisition, yet
no one has made a move.
Why? In the past, Gold Standard’s market cap has been as
high as C$600 million which would have deterred many
potential suitors, but now at $210 million that is no longer
the case.
The creation of Nevada Gold Mines in 2019 through the
merger of Barrick Gold and Newmont Nevada assets would
also have been a knock by reducing two potential
candidates to one, and that one being occupied with
digesting a merger. There are other large players in the state
so will 2021 be the year for some action for Gold Standard?
Also in Nevada, West Vault Mining’s Hasbrouck oxide heap
leach project near Tonopah is a clear contender for
17
 GOLD OUTLOOK
production and possible acquisition given it received a
record of decision (RoD) from the Bureau of Land
Management, the final major permitting step to allow
construction. The company believes Hasbrouck would yield
an after-tax IRR of 106% at current gold prices from
production of 71,000oz a year for eight years for an all-in
sustaining cost of $709/oz following an initial capex of
$46 million.
Its relatively modest annual output of 74,000oz/y would be
too small for larger companies but there are several small-
and medium-sized producers in the state which would
benefit from its addition to their portfolios. However, West
Vault’s shareholders are content to wait for a 10-15%
increase in the gold price before building it, and so any M&A
overture would require a significant premium.
Arizona Gold’s (formerly Kerr Mine) Copperstone project in
Arizona, USA, looks at annual production of less than
40,000oz/y and a sub five-year mine life which is likely too
small to elicit M&A attention.
While a $23 million capex is affordable, the project really
needs to stretch its potential life. In Colombia, both the
Marmato and Gramalote projects look set to advance into
Metates gold-silver project in Durango, Mexico
18
production. Marmato was spun out of Gran Colombia Gold
to form Caldas Gold in 2020 and having secured $148
million in stream financing from Wheaton Precious Metals
and an C$85 million in financing it is all set to develop the
Marmato Deeps deposit and produce 135,000oz/y for 14
years following initial capex of $269.4 million.
Dealmaker Serafino Iacono has already transacted the
company which is set to become Arias Gold under the
leadership of Neil Woodyer—who was formerly head of
Leagold Mining—and an all-star board as soon as Caldas
secures a 30-year extension to its mining title, which is
expected shortly.
Gramalote is a joint venture between B2Gold and
AngloGold Ashanti with a feasibility study due to be
completed in early 2021 for an openpit operation heap
leach. The project could produce 284,000oz/y for 14 years
following a $901 million capex.
The pre-feasibility used a $1,350/oz gold price and yielded
an IRR of 18.1% and so at current gold prices, and with the
feasibility likely to use a higher reference gold price,
Gramalote will almost certainly move into B2Gold’s mine
build pipeline, which is timely since its mine build team
May 2021

completed the expansion of its Fekola mine in Mali in
September 2020 and needs another big project to get its
teeth into. Mine building activity also looks set to ramp-up
in the Maricunga gold district of Chile where several players
are advancing projects.
Kinross recently restarted its La Coipa mine which will
produce into 2022 and 2023, and while this is a short life it
can provide a stepping-stone into its other organic
opportunities in the region such as Lobo Marte.
Kinross is looking to make a construction decision in 2025
for an operation which could produce 300,000oz/y for 15
years following a $995 million capex. Rio2 is looking at a
quicker development timeline for its nearby Fenix project,
which could produce 85,000oz/y for 16 years following a
capex of $111 million.
Rio2 management has successfully built openpit heap leach
projects in the past in Peru (Shahuindo and La Arena) during
their previous gig at Rio Alto Mining, but with other larger
players in the region including Kinross and Hochschild
Mining, Rio2 is a clear M&A candidate. As with the feasibility
list, the pre-feasibility list also includes projects that face
clear obstacles related to permitting and communities, such
as Springpole, Romero, Cerro de Gallo and La India.
First Mining Gold’s Springpole project looks attractive on
paper, but as some projects do it has a challenge which
could become an Achilles Heel, in this case the need to
build two coffer dams on one corner of Springpole Lake as
part of the deposit is underneath the northern bay of
the lake. The two coffer dams total be about 940m and have
a maximum height of 17m and about 150 hectares which
needs to be dammed and dewatered.
While First Mining studies say there are no endangered
species in the lake, it is popular with recreational fly
fisherman who will no doubt be concerned about any
disturbance. In any event, the $718 million capex is just
under three times the company’s $289 million market cap,
and as it will be a single asset company, financing the
project will be a challenge.
GoldQuest Mining’s Romero project in Dominican Republic
was a standout takeover candidate in 2017 when Agnico
Eagle Mines made a strategic investment into the junior due
to its attractive economics and district scale exploration
potential. But it lacks a crucial piece of paper: an
exploitation licence.
Its exploitation licence received mining ministry approval in
January 2018 but has since languished on the desk of the
national president awaiting a signature.
Without this, the company cannot advance to the
environmental impact assessment and feasibility study.
May 2021
GOLD OUTLOOK
The delay has cost GoldQuest many key members of its
management team, and while the company’s fortunes could
turn around at the stroke of the pen, few are holding their
breath. Argonaut Gold’s Cerro de Gallo project in
Guanajuato, Mexico, is also stuck in permitting as
environmental authority Semarnat refused to permit the
project in early 2020.
This roadblock saw the company subsequently pivot to
acquire Alio Gold for its Florida Canyon mine in Nevada and
greenlight the development of its Magino mine in Ontario,
Canada. Condor Gold faces a different challenge at its La
India gold project in Nicaragua. The project is permitted but
it has to acquire all the necessary surface rights before it can
commence construction, which as of December 2020, some
7% were still outstanding. La India would produce
79,300oz/y for eight years following a $110 million capex.
Condor’s approach has been to continue ticking-off the list
of pre-development activities but it clearly wants to sell it
rather than develop it.
While the number of companies potentially interested in
setting-up shop in Nicaragua is limited there are recent
precedents: Calibre Mining obtained its Libertad and Limon
mines in Nicaragua through acquisition in 2019, and Mako
Mining merged with Golden Reign Resources in 2018 to
obtain San Albino which it is building and on the verge of
commencing production.
Both are currently focused on implementing their respective
business plans and exploring the concessions they have,
and so are not immediate contenders.
Will Condor have to undertake the final derisking activity
and build La India in order to find a buyer?
Photo: iStockphoto.com
19
 GOLD OUTLOOK

Slim pickings:
Africa’s meagre
gold project
pipeline

Given the choice between is set to be developed away from Western markets after a
prolonged bidding war for control of Cardinal, with China’s

exploring and developing Shandong Gold poised to emerge victorious over Russia’s
Nordgold in the coming days.

an early-stage gold project The battle to develop Namdini has played out as hoped by
Cardinal’s CEO Archie Koimtsidis back in June 2020, who
or letting some following Shandong’s initial A60c bid told Mining Journal he
felt the company was valued “north of A$1”. Shandong’s final
unfortunate junior sweat offer came in at $1.075 per share, meaning the asset will
change hands for nearly double the company’s initial A$300
it out, the overwhelming million takeover offer. The project boasts a post-tax NPV of
US$590 million and IRR of 33%, with a capital efficiency of
preference among major US$91, based on capex of US$390 million and lifetime
production of 4.2Moz.

players over the past few
years has been for
the latter.
While the approach was understandable given market
conditions, it has left a limited number of quality projects up
for grabs. This is especially the case in Africa, where only
seven junior-led projects of significance - we put the cut off
at about 70,000 ounces per year - have reached the
feasibility study (FS) stage, and sales are pending on two of
those. Starting in West Africa, one of the world’s major
supply growth centres, the largest undeveloped resource is
ASX-listed Cardinal Resources’ Namdini project in north
Ghana. However, the 5.1 million ounce shovel-ready project
Also in Ghana is Bibiani, described in a June 2018 feasibility
study as a 10-year, 100,000oz-per-annum operation yielding
gold at all-in sustaining costs of US$700-800oz per annum.
The project, which boasts a capital efficiency of $68 - the
lowest among FS-stage projects on the African continent -
has been developed to date by Resolute Mining, but in
December the company agreed to sell it to China’s Chifeng
Jilong Gold for US$105 million.
Resolute’s interim CEO Stuart Gale said on January 28 he
was “feeling pretty confident” about the deal completing in
March, having just undertaken a site visit with the buyer
during a recent trip to West Africa. Resolute put Bibiani on
“strategic review” in December 2019 despite being hailed as
a “compelling growth opportunity” by former CEO John
Welborn 18 months prior. It had been looking for a buyer
since May 2020. So with China-based companies swooping
for Namdini and Bibiani, where are the region’s other stand

20 May 2021

out projects? African Gold Group released a definitive
feasibility study for its Kobada project in Mali in June 2020
which doubled the company’s proposed production to
100,000oz for the first five years of operation. Average
production over a nine-year mine life comes in at just over
77,500oz. Capex on Kobada will amount to US$125 million
plus a contingency of US$11 million, which the company
said would be paid back 3.8 years from start of production.
That all adds up to a capital efficiency figure of $187.
But more is to come at the Mali asset. African Gold Group is
set to release a new mineral resource estimate for Kobada
early this year, following a drilling campaign which the
company said early January has “consistently intercepted
deeper oxides and new mineralised oxide zones that were
not anticipated in the original plan”. CEO Danny Callow said
the company was working hard “to design an extended
drilling strategy which we believe will continue to show the
true potential of the Kobada deposit”.
In Burkina Faso, Toronto-listed Orezone has made a strong
start to the year on its 5Moz Bombore project. The company
said earlier this week it had secured binding commitments
of more than US$182 million to develop the “shovel-ready”
asset, with first gold targeted by the third quarter of 2022.
The company had been expecting to achieve first gold in
2021, but withdrew that guidance in March 2020 in
response to the global outbreak of COVID-19.
A 2019 updated feasibility study had put initial capex at
US$153 million for a plus-13 year mine, producing an
average annual 133,800 ounces over the first 10 years, with
an after-tax NPV5 of $361 million and IRR of 43.8%. Payback
was estimated at 2.5 years using a gold price of $1,300 an
ounce, more than $500/oz below today’s spot price. Moving
south west into Nigeria, TSX-V-listed junior Thor Exploration
is due to pour first gold at its fully-financed Segilola project
due in the June quarter of this year.
A definitive feasibility study for the openpit at Segilola put
pre-production capex at $87 million, generating a post-tax
NPV of US$138 million and post-tax IRR of 50%. Average
production over a five-year mine life is estimated at
80,000oz at an AISC of $662/oz. Another study has indicated
the addition of an underground operation could take
production to an average 100,000oz a year. Nigeria’s
dwindling revenue from oil and gas has seen the
government embark on a major push to promote its
mining sector.
Segilola would be the country’s first large-scale gold mine,
and while embarking into untested waters is not typically
popular among investors, Nigeria’s desire to push the
project as an advert for its mining sector means the risk of
any nasty clashes with the authorities are slim. In fact, the
only downside from Thor’s perspective seems to be the
May 2021
GOLD OUTLOOK
prospect of management being wheeled out at every
virtual mining event as a poster child for Nigerian mining.
On the other side of the continent, Orca Gold’s Block 14
project in the north of Sudan - close to the Egyptian border
- gained momentum in December after the US formally
removed Sudan from its list of state sponsors of terrorism.
With final permitting in progress, the company said Sudan’s
de-listing allowed it to accelerate discussions with the host
government around a timeline for construction.
A September update of Orca’s 2018 feasibility study
outlined economics at a US$1,350/oz gold price of a
167,000ozpa operation with a 13.6-year mine life.
For pre-production capex of $321 million, the project would
produce gold at all-in sustaining costs of $751/oz,
generating an after-tax net present value, at 5% discount, of
$607 million and an internal rate of return of 33%. The
capital payback period was forecast at 2.9 years. But despite
Washington’s encouraging move, Sudan’s risk profile makes
it tough to develop as a standalone project and equally
tricky to convince shareholders of a potential acquirer.
Of the larger names with experience operating in non-
straightforward jurisdictions, Resolute could prove a worthy
suitor, having taken a 15% stake in Orca in 2018. However,
Gale may already have enough on his plate with a net debt
figure of US$230 million as of the start of the year.
The company has traded poorly over the past year and costs
at its Mako mine in Senegal are set to rise from US$800/oz
to $1,200/oz over the course of 2021. The margins at Block
14 would therefore represent an improvement on what the
company is currently dealing with, and its recent poor
performance could provide the necessary impetus to take a
chance. Sudan’s neighbour to the south east, Ethiopia,
boasts another development project - one that has been
stuck in limbo since 2015 but now looks set to advance in
the coming months, despite gathering civil unrest in the
north of the country.
KEFI Gold and Copper (formerly KEFI Minerals) said earlier
this week it expects its flagship Tulu Kapi project, located
360km due west of Ethiopia’s capital, Addis Ababa, to be
fully financed by March, with production anticipated in the
December quarter of 2022. A 2015 definitive feasibility
study on Tulu Kapi outlined a 190,000 ounce per annum
operation for a $125 million NPV (post-tax, 8% discount)
using a $1,250/oz gold price. London brokerage SP Angel
put the NPV at more than $264 million using a $1,700/oz
gold price. Equity partners courted by KEFI included
regional and federal governments. The structure of the deal
allows the company to retain up to 75% project ownership,
though the conservative expectation was for the company
to keep around 65%.
21
 GOLD OUTLOOK
Africa’s next
generation of
gold projects
In our feature published at
the end of January, we
identified seven junior-led
projects which have
reached the feasibility
study stage.
This piece will focus on projects at an earlier stage - ie those
being developed by publicly-listed companies which boast
either a pre-feasibility study, a preliminary economic
assessment or scoping study.
At the top end of the spectrum in terms of projected
production is OreCorp’s Nyanzaga project in Tanzania.
The ASX-listed junior aims to spend nearly US$300 million -
split roughly 50/50 between debt and equity - developing a
4Mt per annum operation producing more than
200,000ozpa at all-in sustaining costs of less than $900/oz.
The Nyanzaga deposit contains more than 23Mt grading
4gpt, although with gold prices at elevated levels OreCorp
plans to add additional resources from the neighbouring
lower grade Kilimani deposit, estimated to contain 5.6
million tonnes grading 1.2 grams per tonne for 220,000oz.
But despite promising geology and economics, Nyanzaga
has suffered from its location in a country where there has
22
been considerable friction between government and
miners, largely stemming from the failure of certain
companies to fulfil their tax obligations in years gone by.
A deal struck between Barrick Gold and the Tanzanian
government at the beginning of 2020 offered a sign that
government-miner relations may be improving, but
OreCorp has still yet to receive its special mining licence
(SML), which it needs to proceed with development.
The licence was originally due to be granted late 2019.
CEO Matthew Yates said recently he hoped the licence
would be granted in Q1, after which the company would
undertake a definitive feasibility study over the following six
to nine months. A similar length of time would be needed
to secure funding, said Yates.
“We’re very optimistic that we’ll be able to fund the project,”
Yates said.
As with much of Africa, funding gold projects in Tanzania
can be challenging, largely because of the high level of risk
perceived by investors. Emma Beaty, COO and director of
research at Minehutte, a company providing legal risk
analysis for the mining industry, said while the fact the
licence was taking a long time was not in itself a huge
concern, Tanzania’s recent history with mining companies
meant there was “a big risk factor”.
“Tanzania has complete discretion over these decisions; we
would rate their mining licencing processes as a critical risk.
The highest level of risk that we give is in licencing
processes and the discretion that they have in them. And
we’re seeing that not just with the majors and this battle to
May 2021

renegotiate their existing agreements, but we’re also seeing
it with the smaller companies that are there,” said Beatty.
Switching to the other side of the continent, AIM-listed
producer Hummingbird Resources has a pair of
development projects on its books: Dugbe in Liberia and
Kouroussa in Guinea, which the company acquired from
Cassidy Gold mid-2020.
A 2013 PEA for Dugbe outlined a 125,000ozpa operation
over 20 years, with a capex of US$212 million, post-tax NPV
of US$337 million and post-tax IRR of 43%.
While the economics appeared positive, the signing of an
earn-in agreement with TSX-listed Pasofino in June 2020 just
days before it unveiled the Kouroussa transaction signalled
a step back from Dugbe for Hummingbird.
Pasofino, which raised C$10 million in September to
progress exploration and development at Dugbe, will take a
49% stake in the project pending the completion of an
exploration programme and DFS.
Meanwhile, at Kouroussa, Hummingbird is targeting
100,000oz/year at an all-in sustaining cost of US$800/oz
over an initial five-year life of mine.
The current resource amounts to 1.18Moz of gold about
3g/t, but the company believes exploration will see those
figures rise.
Hummingbird said it would update the market further once
it had secured a mining licence from the Guinean
government, with analysts expecting an update on the
company’s development plans for the project by the end of
June.
Canadian investment firm Canaccord Genuity described
Kouroussa as a “game changing” acquisition for
Hummingbird because it is set to turn the company from a
single to multi-asset producer.
Canaccord also pointed to the low cost of the transaction:
Hummingbird paid Cassidy just £10 million up front, with a
deferred payment of £10 for every ounce of reserve
published above 400,000oz, capped at 1Moz.
Heading south into Cote d’Ivoire, ASX-listed Tietto Minerals
is due to deliver a PFS for its much-hyped Abujar project
before the end of the March quarter, with a DFS set to follow
in Q3.
Drilling over the course of summer 2020 saw Tietto increase
Abujar’s resources by 40% from 2.15Moz to 3.02Moz in
October. The company said earlier this month the project
was set to be “West Africa’s next gold mine” after it was
granted a mining licence by the Ivorian mining ministry in
December.
May 2021
GOLD OUTLOOK
“We’re very
optimistic that we’ll
be able to fund the
project.” said
OreCorp CEO
Matthew Yates
Central to Tietto’s operational plan is the Abujar-Gludehi
deposit, which has grown by 490,000oz from 1.81Moz to
2.3Moz grading 1.5 grams per tonne.
AG now hosts more gold than the company’s November
2019 resource estimate for the entire project.
The deposit contains a high-grade, near-surface core that
has grown 16% to 22.8Mt at 2.18gpt for 1.6Moz.
Indicated resources at AG increased 44% to 24.1Mt at 1.6gpt
for 1.24Moz of contained gold, representing more than 41%
of the project ounces.
Tietto has begun US$2.5 million-worth of early site works as
well as a 70,000m drilling programme, the results of which
the company hopes will underpin its DFS.
The company is well funded, with over A$57 million in cash.
Among other earlier stage projects where progress has
been made over the past year, Altus Strategies’ Diba asset in
Mali stands out as a potential target for future M&A activity,
especially given the company’s status as a project generator.
Altus followed up a promising estimate for Diba in July 2020
with a PEA in November showing at 57,000ozpa operation
over a 3.25-year mine life at an in sustaining cost of
US$544oz.
The November estimate put post-tax NPV10% at US$107
million at a gold price of $1,500/oz, with a payback of 6.1
months.
Drilling results released in January, with highlights including
at 3.34 g/t over 60m from 17m - including 13.60 g/t Au over
9m - and 4.48 g/t over 15m from 22m, further underlined
the project’s strong potential, with analysts at SP Angel
declaring the results “indicate the probable development of
a valuable gold mine at Diba”.
Altus announced a new discovery at the project on February
11, located in a separate area 1.5km from the main deposit.
The find has the potential to boost the Diba PEA further,
and the company said it would be following up with further
drilling shortly.
23
 GOLD OUTLOOK
Also in Mali, AIM-listed Cora Gold is attempting to progress
its Sanankoro gold project in the south of the country
towards a DFS by the end of 2021.
A scoping study released in January 2020 showed 45,000oz/
year production for three years and IRR of 84%..
The company signed a US$21 funding agreement in June,
conditional on the delivery of the DFS, which needs to show
a minimum six years’ mine life at 40,000 oz/year gold
production, and a 60% internal rate of return (IRR) based on
a US$1,400/oz gold price.
Cora said on February 10 it had made a series of new surface
gold discoveries at Sanankoro, which CEO Bert Monro said
would be prioritised and fed into the company’s drilling
pipeline. Other promising developments on the continent
include Shanta Gold’s West Kenya project, which boasts an
inferred resource of 1.18Moz at 12.6g/t.
A scoping study released in October showed a nine-year
mine life at an average of 105,000ozpa, with all-in sustaining
24
costs of US$681 million. The study also revealed a post-tax
NPV of US$340 million and IRR of 110% at a US$1,700/oz
gold price.
Infill drilling at the project began in the December quarter
and will continue into 2022-2023, at which point the
company will decided whether or not to proceed with
development.
Estimated pre-production capex amounts to US$161
million, the bulk of which the company should be able to
finance with operating cashflows, according to analysts at
UK investment firm Liberum.
Liberum noted the presence of “significant growth
potential” at West Kenya, which it said was not being
accounted for in the economics or resources of the project.
“With Isulu and Bushiangala not fully explored and other
deposits likely in the Liranda Corridor, we expect that there
will be a significant increase in the gold resource in coming
years,” said Liberum.
May 2021

Stellar metrics just the
start for near-term
developer Theta Gold
Theta Gold Mines is poised for a
rerating as it rapidly moves to
become a key player in South
Africa’s mining industry.
The company is bringing a new shine to an historical,
multimillion-ounce gold field, looking to initially start with
an eight-year, low-cost underground development set to
provide an internal rate of return around 100% at the
current gold price. However the excellent metrics are just
the beginning, chairman Bill Guy is quick to point out, at
what the company believes will be a circa 30-year operation.
Theta has more than 6 million ounces of gold under
management at its flagship TGME project, putting it in the
top three undeveloped gold resources among ASX-listed
peers.
The company controls the Eastern Transvaal gold fields,
where South Africa’s gold mining industry began about 130
years ago, and its subsidiary Transvaal Gold Mining Estates
dates back to 1882, making it one of the country’s oldest
mining companies.
It has more than a century of data to draw from, with more
than 40 former mines on the property, overlain by a
modern, big company approach helped by key recruitments
from South African gold major Harmony Gold Mining.
“They joined us because of the assets and because they can
May 2021
THETA GOLD MINES | GOLD
GOLD OUTLOOK
OUTLOOK
see the long-term future at Theta,” Guy said. “These guys
know how to build a mine in South Africa and deliver a
project.”
He said the input from ex-Harmony experts had helped
hone the company’s focus on starting with the higher-grade
underground ore, to get the initial capex paid off.
Theta’s existing 1.4Moz openpit resources would form part
of future expansions.
Underground mining is well understood in South Africa and
the phase one TGME underground mines are within a
granted Mining Right (MR 83). Non-conforming changes to
Environmental Management Plan (EMP) will require further
permitting.
A prefeasibility study released in April for the TGME
underground development – based on three of the 43
former mines – outlined initial capex of US$79 million
(<US$40m initial peak spend) for an eight-year operation
producing 419,000oz of gold. The PFS estimated all-in
sustaining costs at $905/oz, in the bottom quartile for South
African producers.
The net present value (5% discount) stood at $115 million
and internal rate of return at 100%, using a $1,700/oz gold
price, increasing to $132 million and 111% respectively at
$1,800/oz.
“For a very small amount of capital, we’re going to
potentially build a 160,000 ounce a year production profile
within the first 5 years,” Guy said.
25
 GOLD OUTLOOK | THETA GOLD MINES
He noted the TGME PFS was based on only 16% of the 4.5
million ounces in the project’s underground resources, and
said the project held plenty of further upside.
The next cab off the rank is the Rietfontein mine, which has
an indicated 242,200oz grading 8.2g/t and an inferred
537,600oz at 14g/t.
Theta is planning to upgrade Rietfontein’s 2017 scoping
study to a prefeasibility study in the third quarter, to feed
into a larger feasibility study on the phase one
development.
The company then has a multitude of near-surface targets
near the existing, fully permitted processing plant, which is
set to be upgraded and expanded.
“The resource pipeline into the future is strong and the scale
of the potential resources and the geology in South Africa
should not be underestimated,” Guy said.
“Over 40% of the world’s gold has come from the small
corner of South Africa that we call home.”
Guy envisages a debt and equity combination for likely well-
timed project funding.
“We feel there is a lot of money going towards projects and
at the moment, but there’s a relatively few number of pre-
development projects around,” he said.
26
“We really see this as
a good investment
opportunity – we’re
undervalued against
our peers.”
The sentiment is echoed by Zacks Small-Cap Research
analyst Steven Ralston, who described Theta as being on the
threshold of becoming a gold producer and highlighted
management’s moves to optimise the project by initially
targeting higher-grade, near-surface deposits and
optimising mining and processing methods.
Ralston said Theta’s preferred method of mechanised long
hole stoping would result in higher grade ore, dramatically
improving cost efficiency per ounce.
He indicated a target price of US69 cents per share, based
on the calculation of share value of attributable resources.
This target converts to about AU88 cents, compares with
Theta’s current share price of A24 cents on its primary ASX
listing.
The top of Theta Gold Mines’ TGME gold plant in South Africa
May 2021
 THETA GOLD MINES | GOLD OUTLOOK

Ralston expected Theta’s stock to react to upcoming

announcements concerning the Rietfontein PFS, resource
upgrades and process towards refurbishing the CIL
processing plant, along with plant design and metallurgical
upgrades.

Focus on ESG
Theta said Environmental, Social and Governance (ESG)
considerations were integral to its development strategy in
South Africa.

It has assembled a highly-competent team to deal with all

“licence to operate” aspects and said local communities
were highly supportive of Theta’s projects.

The company believes TGME will be the biggest employer in

the region and its projects are structured for broad-based
economic participation.

Theta itself owns 74% of the assets, with the balance held
by Black Economic Empowerment entities.

Guy also highlighted the support being shown for the

resources sector in South Africa, with both president Cyril
completing a PFS on Rietfontein, which could further
Ramaphosa and mines minister Gwede Mantashe having
increase the initial production profile.
mining backgrounds.
The company is aiming to upgrade its phase one
Ramaphosa recently said mining would be a key
development plans to a feasibility study within the year and
component of post-COVID-19 economic recovery and job
transition to producer status in 2022.
creation in South Africa. Mantashe also recently reiterated
the government’s commitment to expediting the approvals “This is the beginning of a very long story,” Guy said.
process in the sector.

The pro-mining sentiment gives Theta confidence of

gaining approvals for its proposed amended works Theta Gold Mines – at a glance
programme and associated environmental approvals.

“You have two key persons in the country politically who Head Office
have a very deep understanding of mining and are very Level 35, Intl Tower One
supportive of it,” Guy said. 100 Barangaroo Ave, Sydney NSW 2000

“The outlook for South Africa is picking up and through Tel: +61 2 8046 7584
Theta, you have a chance to get access to a re-emerging Email: info@thetagoldmines.com
economy. Web: www.thetagoldmines.com
“It’s got the best infrastructure on the African continent … Directors
it’s a very important jurisdiction globally.” Bill Guy, Finn Behnken, Bill Richie Yang, Rob Thomson,
Looking ahead, Theta’s 160,000oz per annum production Simon Liu, Brett Tang
aim is based on a six-mine operation and the project hosts a Shares on Issue
multitude of expansion opportunities to further increase 503.25 million
the resource base and production for more than three
decades. Market CAP (at April 29, 2021/A24c)
A$123 million
Meanwhile there are a suite of upcoming catalysts set to
draw investors’ attention. In the coming months, Guy said Major Shareholders
Theta was working on an increase to the mining reserve and Top 10 (68%), Directors and management (9.5%)

May 2021 27
 GOLD OUTLOOK | WORLD GOLD COUNCIL
Bringing new investors
to gold
Bitcoin and other
cryptocurrencies may appear at
face value to be similar to gold
due to their limited supply and perceived role as alternatives
to fiat currency. However, the truth is that cryptos and gold
are fundamentally different asset types that play starkly
different roles in any risk-adjusted portfolio. Cryptos are
new, volatile, and highly speculative. Gold is long-
established, delivers returns in line with other major asset
classes, and plays a critical role in hedging against the type
of high-risk assets that cryptos represent.
Gold protects wealth
Adding Bitcoin or any other cryptocurrency to your portfolio
is akin to investing in FAANG (Facebook, Amazon, Apple,
Netflix, Google) or other tech stocks. In other words,
cryptocurrencies are high-beta assets exhibiting eye-
popping volatility and potentially very-high returns.
In each of the past 10 years, Bitcoin’s annual volatility has
been multiple times higher than that of gold and equities.
Although in 2020 Bitcoin’s annualised average daily
volatility was the lowest since 2016 and the third-lowest in
the last 10 years, its average volatility was still triple that of
gold and double that of the S&P 500.
Bitcoin’s contribution to improving the risk-adjusted return
of a portfolio comes solely from its returns. On the other
28
hand, gold is a source of returns, as well as a genuine
diversifier that reduces volatility in your portfolio and helps
protect you during sell-offs.
While people who buy cryptos do so almost entirely for
speculative reasons, the fact that gold is bought and sold by
parties outside the investment community – such as
electronics manufacturers, jewellery makers and scrap
suppliers – helps to constrain wild price fluctuations.
Although some people undoubtedly speculate in gold, its
best returns (and worst losses) are low in comparison to
crypto, silver, platinum group metals, and some base metals.
There appears to be growing recognition of the benefits of
having gold in an investment portfolio.
In a 2019 survey of more than two thousand retail investors
in each of Canada, China, India, Germany, Russia, and the
United States, 30% said gold’s primary role was to protect
wealth, while fewer than 10% said its primary role was
speculation. In contrast, fewer than 20% saw Bitcoin’s
primary role as wealth protection and more than 20% saw
its main role as speculation.
Crypto lags on regulation
Another important difference between crypto and gold is
the greater regulatory risk associated with crypto. Gold has
been traded on exchanges for more than half a century and
is closely regulated on these exchanges, resulting in fines
and prosecutions when traders break the rules.
May 2021

Its regulatory frameworks are well understood and central
banks and regulators understand gold and are comfortable
with it as an asset class. One can never predict with absolute
certainty what will happen in a regulatory environment, but
gold isn’t currently a concern of legislators and it is unlikely
anything will come out of left-field in the near future.
In comparison to gold, the regulatory framework for cryptos
is underdeveloped. Only five jurisdictions (Australia, Canada,
Denmark, Japan, and Switzerland) have implemented both
tax laws and anti-money laundering/anti-terrorism
financing laws in relation to cryptocurrencies, according to
research by the US Library of Congress.
A further 14 jurisdictions (including the UK and nine EU
member states) have introduced only tax laws, while 13
jurisdictions have introduced only anti-money laundering/
anti-terrorism financing laws.
In the USA, several state governments have passed laws
affecting cryptocurrencies, but little has been done at the
federal level.
Enough noise has been made by legislators in the USA and
elsewhere to know that changes are coming, but there are
more questions than answers as to what the eventual
regulatory framework will look like.
Gold advanced on ESG
A third major difference between crypto and gold is how
they relate to ESG (environmental, social, corporate
governance) issues.
Gold’s status as an established asset with mature
representative bodies – namely the World Gold Council
(WGC) and the London Bullion Market Association (LBMA) –
has enabled it to lead from the front on ESG issues.
For example, the WGC’s Responsible Gold Mining Principles
(RGMPs), containing 51 ESG principles, set clear
expectations for consumers, investors and the downstream
gold supply chain as to what constitutes responsible gold
mining. All WGC members, 33 of the world’s leading gold
mining companies, are committed to the RGMPs, and in
2019 the WGC set out a three-year timeline for full
implementation.
Companies implementing the RGMPs will have to obtain
external assurance from a third-party, independent
assurance provider.
Non-members have also expressed interest in signing up to
the principles. Cryptocurrencies lack any clear umbrella
body, and their decentralised and distributed nature makes
it difficult to see any sort of central authority appearing in
future. However, one thing is certain: as the push for
May 2021
WORLD GOLD COUNCIL | GOLD OUTLOOK
responsible investment grows, an asset class that consumes
tremendous amounts of energy without appearing to offer
any tangible ESG benefits will become increasingly
vulnerable. When it comes to proving ESG credentials, the
gold industry is doing a lot of work from the Responsible
Gold Mining Principles to a credible pathway of
decarbonising the sector by 2050.
In addition, there is a real commitment from WGC members
to support socioeconomic development within their host
nations, including some of the world’s poorest countries.
Also, it is likely that gold, as a climate risk-mitigating asset
which produces virtually zero emissions once mined, will
play an important part in decarbonising portfolios over
time.
Both cryptocurrency and gold mining are currently energy-
intensive processes. But while the gold industry is actively
making progress on reducing energy use and associated
emissions, intense energy consumption is intrinsic to how
most cryptocurrencies are set up – in essence, the energy
required increases with demand.
Gold mining has a wide range of beneficial social impacts
and can catalyse wider socioeconomic development, but
crypto mining is a purely digital activity with very little
linkage to the real economy and physical world, and
therefore has few wider ‘real world’ impacts.
Gold is a hedge for crypto
Twelve years on from the launch of Bitcoin, it seems that
cryptocurrencies are here to stay. The World Gold Council
does not have a position on crypto investment, it being
outside of our mandate and area of expertise.
However, we can offer two pieces of advice to anyone
thinking of investing in cryptocurrencies: understand the
differences between crypto and gold; and consider hedging
any investments in Bitcoin or other cryptos with some
exposure to gold.
World Gold Council – at a glance
Head Office
7th Floor, 15 Fetter Lane, EC4A 1BW
London, United Kingdom
Tel: +44 20 7826 4700
Email: info@gold.org
Web: www.gold.org
Members
www.gold.org/who-we-are/our-members
29
 GOLD OUTLOOK

The seismic
events
shaping the
gold market

It’s interesting, if not The key point in trying to understand earthquakes and
tsunamis is that they are driven by the most powerful force

frightening, to think of the in the world, the shifting of tectonic plates that shape the
world as we know it. Gold over the past six months has been

gold market today as behaving as if it too is being buffeted by movement in

tectonic plates ahead of a financial earthquake and tsunami.

behaving like the ocean The contracting phase, similar to the ocean falling, started
last August when the gold price was at an all-time high of
ahead of a tsunami, US$2,067 an ounce before dropping to a low earlier this
month of $1,687/oz, an 18% decline that caused an in-rush
contracting back after of low-ball price forecasts all the way down to $1,400/oz.

a seismic event hundreds

But, just as the time when the ocean level is falling and
before the tsunami flood, there is an eerie silence as people
unfamiliar with the process wander out to look at the
of kilometres away to ground exposed by the water’s retreat without realising the
risk they’re taking.
reveal the ocean floor In a curious way the point reached in the gold market is the
before an almighty in-rush equivalent of the time between water flowing out and the
rush back in with the contraction since August as result of

floods everything. tectonic plates shifting in the US, where interest rates on
government bonds have started to move higher.

Rising rates, especially for 10-and-30-year Treasury bonds

Starting with recent ceremonies to mark the 10th
anniversary of the Fukushima tsunami in Japan which killed
16,000 people and caused a meltdown of a nuclear power
plant which scuttled a revival in the uranium market.
Images of the 2011 Fukushima tsunami also serve as a
reminder of the 2004 Boxing Day Tsunami which killed
230,000 people in 14 countries, mainly on the Indonesia
island of Sumatra.
are gold’s great enemy given that the metal does not pay
interest in its bullion form, so when official US interest rates
fall, gold rises - and the other way round with gold falling as
rates rise. It sounds simple and it really is that simple, as an
easy test demonstrates. On the day gold hit that all-time
high of $2,067/oz, the 10-year US Treasury note was at an
all-time low of 0.508%, having fallen from 3.26% three years
earlier, a time when gold was priced at $1330/oz (high rate
= low gold!).

30 May 2021

Most investors understand the intimate link between US
interest rates and gold but where they stumble is not
applying that knowledge to interpreting the future
direction of gold as it reacts to US interest rates - and that’s
when the tsunami analogy becomes quite handy.
The gold-price process seems likely to follow the outgoing
water level as the US lifts rates from their economic stimulus
settings designed to encourage growth - something that is
being delivered by the bucketful.
Gold should continue to benefit for another 12-to-18
months if (and that’s a big if ) the US central banks sticks to
its plan of not raising interest rates until late next year or
early 2023.
The challenge for investors is believing that the US will keep
rates low as economic growth storms up to a Chinese-style
6.5%, driven by a combination of a massive stimulus
program which is dumping $1.9 trillion into the economy
while households and business revel in the joy of interest
rates at historically lows.
Good times, as we all know, never last and for the US
economy (and everywhere else) excess money creation
leads inevitably to the return of the world’s most efficient
destroyer of wealth, inflation. Right now, the world’s
governments and their central banks are trying to walk the
May 2021
GOLD OUTLOOK
fine line between encouraging growth and avoiding an
outbreak of inflation above their target of 2%-to-3% a year.
A modest level of inflation might not be a problem but
achieving that without “overshooting” will be extremely
difficult and if that happens the banks will resort to their
proven inflation killer, an increase in interest rates.
For gold, the outlook is tricky. Investors have started to take
some of their money out of the metal because they can
sense the trend of the next few years with funds already
being rotated out of gold into growth and interest-bearing
assets. That trend is likely to continue, driving gold down
towards the $1,400/oz mark, until the money flood, like a
tsunami, pours in and investors discover that gold is a
wonderful hard asset to hold at a time of rising inflation.
Over the long run, gold can surge back, perhaps reclaiming
the high ground of $2,000/oz, and perhaps going further,
depending on the inflation-tolerance level of central banks.
But getting to the point of another gold rush like we’ve seen
over the past three years will require the equivalent of a
tsunami-causing seismic event with the most likely trigger
being central banks losing control of their inflation targets.
Unknown, as ever, is when this situation will unfold. All that
can be said today is that the groundwork is underway and
gold is an asset that ought to remain in every portfolio.
Photo: iStockphoto.com
31
 GOLD OUTLOOK

Golden
opportunity
in tarnished
stocks?

Sprott’s John Hathaway BMO gold webcasts. They’re generating lots of free cash
flow; their earnings comparisons year-over-year are going to

did a lot of virtual be very positive - mainly because the average gold price will
still be positive on a yoy basis - plus a lot of them were shut

meetings during the down for varying periods of duration in 2020 because of
COVID and as we come out of the pandemic, which we’re

recent BMO 2021 Metals doing, you’ll see a more normal level of operation.

“So I think the earnings momentum is there and in addition

and Mining conference the macro outlook for the gold price is very positive. Gold
stocks right here are compelling from a risk-reward point of
and apparently heard view.”

plenty of evidence that

Not everyone agrees with gold bull Hathaway on the
outlook for the gold price, buffeted since January by
positive US treasury bond yield movement and sentiment.
gold miners were getting Gold’s latest uptick has restored some of the gloss lost over
the past six months (down about 9% over that period), with
on with the business of the price remaining more than 17% ahead of where it was a
year ago but still in what a lot of forecasters see as a down-
increasing gold output trending channel.

and producing fat profits.
“I’ve never seen [gold equity stock] values as compelling as
they are right now,” he said afterwards.
“The gold miners remain very profitable, even though the
gold price has retreated some US$300/oz from the peak
level it reached at the beginning of August last year,”
Hathaway, the veteran former Tocqueville Gold fund
manager, said on one of Sprott Asset Management’s post-
Liberum’s Tom Price says while the price remains at relatively
high levels, “the trend is now clearly bearish”. The dominant
driver of the price is US real rates, he says, which by late
2020 started to lift.
“Investor interest in gold has not collapsed, it’s just souring,”
says Price, who has observed a “reluctance to exit” because
many investors still see currency debasement, government
economic and coronavirus mismanagement, and ballooning
trade conflict risks as helpful to the yellow metal.
“Still, we are gold bears,” he says.

32 May 2021
 GOLD OUTLOOK

“No one has done

“We believe that global industrial growth will be
sustainable, and that post-recovery inflation risk will be

anything too
largely manageable by the key central banks.”

dramatic although
The concurrent drop-off in equities is reflected in a Mining-
Journal.com/Bloomberg data review showing three-

people are talking

quarters of the top 100 gold stocks at the start of 2021 were
in the red up to March 18, based on changes in market
value, including 41 of the top 50 (see below).
about bringing in
new projects and
More of the sub-US$1 billion companies (below) have gone
against the prevailing tide (17 of 50 actually rising between
January 4 and March 18), based on USD equity values
captured from the main global stock exchanges. Six of the making heavy capital
top 100 are precious metal royalty companies, which have
generally drifted down with the gold miners. Other than investments again”
sector leader Newmont Mining’s rise in market value over
the period it was notable for the emergence of China’s
production to 1.1 million tonnes, over the next five years.
national gold champion Zijin Mining as No.1 or No.2 on the
list at different times (No.2 ahead of Barrick Gold at the time Newmont, currently worth about US$8.5 billion more than
of writing). Zijin, is targeting gold output of 6.5Moz this year.
Zijin seems to be well ahead of its internal development Zijin says it has about 16% of China’s gold reserves and
goals - as outlined on January 29 this year - which have the resources (2,139t of 13,638t) and circa-74Moz all up
corporation “becoming a top global mining company, and including recently acquired inventory in South America.
an international mining giant powered by high technology
and profitability” by 2030. The company says it will continue “to look into M&A
opportunities with other medium-sized and large producers
Zijin says it wants to expand annual gold output from 1.7- of gold and copper, in an effort to significantly increase the
1.8 million ounces to 2.5-2.9Moz, and double copper reserves and production of our key mineral products, and to

6 Month Gold Price in USD/oz Last close: 1745.32

High: 1952.19 Low: 1685.66
1960
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Oct 20 Nov Dec Jan 21 Feb Mar
Friday, March 19, 2021

May 2021 33
 GOLD OUTLOOK

Global gold leaders (March 18. 2021)

Rank Company Ticker Market Cap Price (US$; March P/E Moving avg change Market Cap (US$B; Price (US$; Jan
(US$B) 18, 2021) % (100 days) Jan 4, 2021) 4, 2021)
1 NEWMONT CORP US NEM 50.45 62.26 24.76 3.00 48.11 63.15
2 ZIJIN MINING HK 2899 41.85 1.44 42.05 22.42 34.45 1.23
3 BARRICK GOLD CN ABX 37.34 20.94 18.63 -11.23 40.51 24.64
4 POLYUS RM PLZL 26.17 96.50 16.12 -5.00 28.5 106.7
5 FRANCO-NEVADA CN FNV 23.57 123.70 48.02 -4.32 23.93 131.91
6 WHEATON CN WPM 17.91 39.56 35.04 -6.47 18.75 45.32
PRECIOUS
7 NEWCREST MINING AU NCM 15.21 19.53 16.18 -5.57 16.2 20.69
8 AGNICO EAGLE CN AEM 14.86 60.33 31.06 -14.30 17.1 75.27
9 POLYMETAL LN POLY 9.72 21.03 9.13 -7.74 10.87 24.98
10 FRESNILLO LN FRES 9.61 13.31 26.20 -11.54 11.38 16.94
11 KIRKLAND LAKE CN KL 9.27 34.43 11.02 -16.06 11.37 44.55
12 ANGLOGOLD SJ ANG 9.17 21.90 9.17 -5.86 10.63 25.49
ASHANTI
13 KINROSS GOLD CN K 8.83 6.86 10.80 -7.50 9.23 8
14 GOLD FIELDS SJ GFI 8.39 9.60 11.56 -1.36 9.29 10.52
15 NORTHERN STAR AU NST 8.13 7.29 21.91 -25.17 7.23 10.18
RES
16 ROYAL GOLD US RGLD 7.17 105.76 36.58 -3.48 6.98 110.28
17 EVOLUTION MINING AU EVN 5.29 3.23 18.49 -14.62 6.56 4.04
18 B2GOLD CORP CN BTO 5.03 4.63 9.70 -15.76 5.88 5.93
19 ENDEAVOUR CN EDV 4.96 20.57 44.08 -10.48 3.79 25.72
MINING
20 YAMANA GOLD CN YRI 4.46 4.52 17.77 -14.48 5.44 6.09
21 SSR MINING CN SSRM 3.42 15.52 33.05 -15.19 4.41 21.51
22 CENTERRA GOLD CN CG 3.22 10.00 6.63 -7.47 3.43 12.01
23 ZHAOJIN MINING HK 1818 3.21 0.98 -16.27 3.89 1.23
24 ALAMOS GOLD CN AGI 3.21 8.12 22.07 -6.39 3.43 9.65
25 NOVAGOLD RES CN NG 3.07 9.23 -7.22 3.19 10.36
26 HARMONY GOLD SJ HAR 2.70 4.45 17.66 -2.79 3.18 5.33
27 COEUR MINING US CDE 2.52 9.97 83.74 12.22 2.52 10.83
28 ELDORADO GOLD CN ELD 2.09 11.90 15.61 -6.69 2.32 14.22
29 EQUINOX GOLD CN EQX 2.06 8.31 56.17 -17.94 2.5 11.1
30 PRETIUM CN PVG 2.05 10.95 34.61 -4.36 2.15 12.19
RESOURCES
31 LUNDIN GOLD CN LUG 1.77 7.53 33.98 -13.37 1.98 9.24
32 CENTAMIN LN CEY 1.64 1.46 11.80 -10.13 1.95 1.81
33 IAMGOLD CORP CN IMG 1.59 3.24 -8.40 1.74 3.93
34 PETROPAVLOVSK LN POG 1.43 0.36 -11.43 1.76 0.44
35 SANDSTORM GOLD CN SSL 1.39 7.17 65.90 -0.49 1.38 7.67
36 SEABRIDGE GOLD CN SEA 1.35 17.96 -8.92 1.56 22.38
37 CHINA GOLD INTER CN CGG 1.27 3.10 37.66 60.71 0.57 1.48
38 NEW GOLD CN NGD 1.25 1.76 -10.95 1.5 2.34
39 DUNDEE PRECIOUS CN DPM 1.23 6.52 6.26 -5.11 1.34 7.67
40 DE GREY MINING AU DEG 1.17 0.88 1 0.75
41 TOREX GOLD RES CN TXG 1.17 13.58 8.66 -6.17 1.28 16.2
42 OCEANAGOLD CN OGC 1.16 1.60 -4.90 1.36 2.12
CORP
43 REGIS RESOURCES AU RRL 1.15 2.35 8.02 -17.49 1.47 2.96
44 PERSEUS MINING AU PRU 1.14 0.98 14.69 3.74 1.23 1.03
45 GREATLAND GOLD LN GGP 1.14 0.28 -25.71 1.95 0.49
46 ST BARBARA AU SBM 1.08 1.57 11.11 -14.55 1.28 1.89
47 SILVER LAKE RES AU SLR 1.06 1.32 5.10 -2.48 1.21 1.46
48 RAMELIUS RES AU RMS 0.95 1.27 7.13 0.20 1.05 1.36
49 WESDOME GOLD CN WDO 0.93 6.48 22.26 -19.52 1.16 8.84
50 DRDGOLD SJ DRD 0.832 9.89 10.23 -8.51 1.1 12.91

34 May 2021
 GOLD OUTLOOK

“I think for investors

bring our major business indicators and profits to new levels”.

“This will, to a large extent, make us one of the top global

metals and mining companies.”
looking for gold
While Zijin has been rewarded by the Chinese market for its
growth, and growth plan - such as it has been revealed so volume growth via
far - the stalled gold price has flattened investor buying
equities, the trade-off
continues to be
support for emerging Western heavyweights, Northern Star
Resources and Endeavour Mining, which have gained

prospectivity versus
market value from their respective Saracen and Teranga
Gold mergers but lost significant trading momentum in
expanded capital bases.

The two companies have strong balance sheets and solid

brownfield organic growth pipelines, earnings profiles and
management groups.
“Gold is out of favour and gold mining stocks are even more
out of favour,” says Hathaway. “I’ve been investing as a gold
specialist since 1998 and I’ve never seen the values as
compelling as they are right now.
“If you wear your hat as a value investor or as a contrarian
you have to be interested in the stocks, even if you don’t
take a particularly bullish macro view of the gold price -
which I think is another discussion - in a world of over-
valued securities, both bonds and stocks.
“I wrote a paper at the beginning of this year showing the
valuation of the S&P 500 was in the 100th percentile of all
Photo: iStockphoto.com
jurisdictional risk”
historical experience, [which might] go on for a bit, but [it’s
hard to say how long].
The investment consensus is priced for perfection and will
probably get less than perfection.
“Gold mining stocks, which have had a correction going
back to last August, have come down to valuation levels
where, if the stock market were to sell off, which I think is a
reasonable bet, you would probably have a lot less risk in
gold mining stocks.
“And again if the stockmarket was to sell off, it seems to me
that would be bullish for gold because investors would look
for defensive strategies to protect their capital, and of

May 2021 35
 GOLD OUTLOOK

Global gold leaders (March 18. 2021)

Rank Company Ticker Market Cap Price (US$; March P/E Moving avg change Market Cap (US$B; Price (US$; Jan
(US$B) 18, 2021) % (100 days) Jan 4, 2021) 4, 2021)
51 GOLD ROAD RES AU GOR 0.786 0.97 13.55 -0.34 0.897 1.07
52 WESTGOLD RES AU WGX 0.662 1.65 12.12 -11.03 0.86 2.07
53 VICTORIA GOLD CN VGCX 0.657 10.89 8.66 0.625 10.12
54 NOVO RES CN NVO 0.608 2.61 18.87 0.449 1.95
55 WEST AFRICAN RES AU WAF 0.595 0.70 317.15 -4.22 0.706 0.84
56 PURE GOLD MINING CN PGM 0.592 1.46 -19.57 0.803 2.03
57 BELLEVUE GOLD AU BGL 0.565 0.70 0.73 0.905
58 PAN AFRICAN RES LN PAF 0.562 0.25 7.55 -18.21 0.721 0.35
59 ARGONAUT GOLD CN AR 0.557 1.76 16.44 -9.53 0.633 2.26
60 PREMIER GOLD CN PG 0.551 2.28 -3.18 0.561 2.46
61 NEW FOUND GOLD CN NFG 0.542 3.74 18.55 0.46 3.24
62 MCEWEN MINING US MUX 0.537 1.12 6.72 0.403 1.05
63 RESOLUTE MINING AU RSG 0.535 0.51 -10.86 0.675 0.64
64 SELIGDAR RM SELG 0.487 0.59 -4.16 0.523 0.62
65 NOMAD ROYALTY CN NSR 0.461 0.82 20.73 -8.22 0.464 0.85
66 HYCROFT MINING US HYMC 0.443 7.14 71.10 -3.15 0.469 8.01
67 MARATHON GOLD CN MOZ 0.435 1.97 -9.45 0.479 2.31
68 JAGUAR MINING CN JAG 0.421 5.66 6.12 -11.52 0.472 6.65
69 CAPRICORN METALS AU CMM 0.42 1.27 .2.64 0.472 1.42
70 GOLDEN STAR RES CN GSC 0.386 3.36 14.03 -11.83 0.412 3.96
71 LIBERTY GOLD CN LGD 0.366 1.38 2.90 0.338 1.40
72 GT GOLD CORP CN GTT 0.329 2.58 52.16 0.202 1.64
73 ALKANE RES AU ALK 0.321 0.56 0.426 0.73
74 ESKAY MINING CN ESK 0.299 2.03 40.22 0.25 1.96
75 RED 5 AU RED 0.288 0.14 -20.99 0.394 0.21
76 GALIANO GOLD CN GAU 0.283 1.18 4.56 -4.25 0.285 1.27
77 BATTLE NORTH CN BNAU 0.271 2.08 37.35 0.277 2.14
GOLD
78 EMX ROYALTY CORP CN EMX 0.267 3.12 -4.31 0.286 3.56
79 INTL TOWER HILL CN ITH 0.262 1.34 -4.14 0.273 1.50
80 OREZONE GOLD CN ORE 0.253 0.79 0.50 0.222 0.84
81 CHAARAT GOLD LN CGH 0.242 0.35 -2.04 0.17 0.31
82 DACIAN GOLD AU DCN 0.237 0.30 -3.81 0.176 0.35
83 GOLD RESOURCE US GORO 0.221 2.80 -2.47 0.209 3.31
CO
84 FREEGOLD VENTURE CN FVL 0.202 0.60 -1.61 0.206 0.66
85 CHESAPEAKE GOLD CN CKG 0.202 3.37 -12.49 0.232 4.19
86 COMSTOCK MINING US LODE 0.202 4.90 365.86 142.96 0.038 1.10
87 CALEDONIA MINING US CMCL 0.191 15.33 9.68 -2.58 0.192 18.34
88 SHANTA GOLD LTD LN SHG 0.19 0.18 9.39 -16.47 0.243 0.24
89 MAKO MINING CN MKO 0.189 0.30 9.29 0.206 0.32
CORP
90 DGO GOLD LTD AU DGO 0.172 2.45 7.45 0.158 2.21
91 GOLD X MINING CO CN GLDX 0.169 3.21 28.01 0.133 2.52
92 ORA BANDA MINING AU OBM 0.162 0.19 -16.93 0.198 0.25
93 GOLD RESERVE US GDRZF 0.149 1.50 -1.42 0.159 1.59
94 MEDUSA MINING AU MML 0.139 0.67 2.71 6.37 0.123 0.61
95 TIETTO MINERALS AU TIE 0.133 0.30 -2.67 0.131 0.29
96 CALIDUS AU CAI 0.121 0.34 -12.47 0.13 0.38
RESOURCES
97 TRANS-SIBERIAN LN TSG 0.12 1.60 31.91 1.60 0.153 1.72
GOLD
98 TROILUS GOLD CN TLG 0.118 0.91 2.92 0.125 0.99
99 MONETA CN ME 0.118 0.29 26.78 0.102 0.28
PORCUPINE
100 GASCOYNE RES AU GCY 0.112 0.45 17.79 0.083 0.36

36 May 2021

course gold is one of those.
“And gold mining stocks by extension are part of that
defensive strategy.
“Let’s not forget the group has a current yield that is higher
than the S&P. It’s roughly 3%. And valuations are about 50%
of what you can get in the S&P if you look at a number of
different valuation metrics.”
Value attributes of Northern Star and Endeavour apply
equally to a number of the leading companies. But the
sector generally has a challenge with limited quality growth
options available to the high number of $1 billion-plus
companies still active and not much new exploration
success restocking the pipeline.
This could fuel price escalation around available assets.
Paulson & Co partner and longstanding vocal critic of
gold-sector capital allocation, Marcelo Kim, says industry
management teams “seem to be more careful and measured
about M&A and big capital decisions” than they were in the
last bull market a decade ago.
“In the last year or so we have seen companies start to talk
about growth again,” Kim says. “No one has done anything
too dramatic although people are talking about bringing in
new projects and making heavy capital investments again.
“We have seen mergers of equals starting with Barrick and
Randgold, then we saw some low premium deals with good
business logic. Now we are starting to see the 40-50%
premium deals, including some for cash, so it looks like
there is an acceleration underway.”
New York-based Bernstein says while “gold is more a macro
story than a mine supply story” - only about 20 projects able
to add 1% or more to global supply sit on its global project
register, but the “entire mined volumes of gold since pre-
history are relatively available” if investors don’t want to wait
for miners to dig new stuff out of the ground - quality gold
deposits can clearly alter capital return rates and ultimately
share values.
May 2021
GOLD OUTLOOK
“I think for investors looking for gold volume growth via
equities the trade-off continues to be prospectivity versus
jurisdictional risk,” Bernstein global metals & mining analyst
Danielle Chigumira told Mining-Journal.com. “It seems there
is way more underexplored greenstone belt in Africa -
compared to both North America and Australia - but only
select operators have the appetite or commitment for the
additional jurisdictional risk.
So because of where the exploration spend is being
allocated it’s more likely for the listed gold sector to deliver
volume growth out of North America or Latin America than
Africa over the next decade.
“Australia, Canada and the US were half of global of gold
exploration spend in 2020. So it’s clear that’s where the
activity is.
“For North America, I think it’s quite possible that we could
see a mega project emerging in Alaska [Donlin Gold has
23Moz of resource] and the pick-up of M&A activity in British
Columbia [Newmont/GT Gold] and Ontario [Evolution/
Battle North] shows the majors are willing to bet on the
region delivering value.
“[But] in terms of the quality of these projects; I’d be a bit
circumspect. We saw after the Newmont acquisition of
Goldcorp - which had a lot of growth options - that post
acquisition Newmont had to push some of those projects
back time-wise and are closely re-examining the previously
published growth plans.
“The risk is that juniors whose whole value is in North
America projects - and there are so many juniors given how
fragmented the gold industry is - are incentivised to talk up
the projects as much as possible and publish long and
detailed technical reports which end up being too
optimistic by an order of magnitude.
“So absolutely we could see these projects being developed
over a 3-5-year period, but probably not before then, and
depending on the specifics of course, I’d be circumspect on
the incremental value for equity shareholders.”
Photo: iStockphoto.com
37