The State of African Mining
Speaker: Chris Hinde, Editorial Director, SNL Metals & Mining
Mining On Top: Africa - London Summit
24-26 June 2014 | London
14. Latin America
26.7%
Rest of World
16.5%
Africa
16.5%
Canada
13.3%
Australia
13.1%
United States
7.2%
Pacific/SE Asia
6.7%
Worldwide Exploration (2013)
Similar share for
Africa last year but
big fall in Australia
28. African Gold Production
AFRICAN SHARE
Excluding by-product gold and artisanal output,
the continent contributed 14% of the global
mined supply of 97Moz in 2013.
African primary gold production exceeded
13.7Moz last year (under 13.4Moz in 2012).
The continent yielded 3.53Moz in the quarter to
end-March, compared with 3.17Moz in the
year-ago quarter, 3.29Moz in Q1 2012 and
3.34Moz in Q1 2011.
29. African Gold Production
NATIONAL RANKING
South Africa's share of the African total fell from 39%
in 2011 to 35% in each of the past two years (and
only 32% in the quarter just ended).
Nevertheless, with almost 4.9Moz in 2013, South
Africa remains easily the continent's largest primary
gold producer.
Ghana was in second place last year (2.85Moz),
followed by Mali (1.42Moz), Tanzania (1.17Moz) and
Burkina Faso (0.77Moz).
31. African Gold Production
NEW GOLD MINES
These include:
2013: Q1 - Nordgold's Bissa mine (Burkina Faso)
Q3 - Newmont's Akyem mine (Ghana)
Q4 - Randgold/Anglogold's Kibali (DRC)
2014: Q1 - Endeavour's Agbaou (Ivory Coast)
Once complete, the integrated open pit and underground
operation at Kibali is expected to produce an average of
600,000oz/y over the first twelve years of its life, which
currently extends to 2031. The mine is targeting 550,000oz
this year.
New major gold mine
almost every quarter
32. Cost of African Gold
AFRICAN COSTS
Based on data from over 90 African gold mines, total cash costs
(including royalty payments) rose in 2011 and 2012 but generally
fell last year and in the first quarter of 2014.
With the closure of some high-cost operations, the continent's
average total cash cost fell to US$881oz last year, and
improved further to US$828/oz in the quarter to end-March.
The average gold price last year was US$1,393/oz.
The continent's primary gold mines have been able to widen their
net operating revenue (gold price minus total cash costs) to
around US$500/oz. This is still well below the African average of
US$788/oz recorded in the March quarter two years ago.
33. Cost of African Gold
0
500
1000
1500
2000
2500
0 10 20 30 40 50 60 70 80 90 100
TotalCashCosts(US$/oz)
Cumulative Share (% gold)
African Gold Mine Cash Costs (2013)
South Africa
Other Africa
Average 2013 Gold price: US$1393/oz
Africa Total Cash Cost: US$881/oz
South Africa average cash cost: US$1184/oz
34. Cash Cost of African Gold (ex SA)
Cash cost of
US$791/oz in
March quarter
Strip out South African operations
(US$905/oz in March quarter)
35. Cost of African Gold
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000
TotalCashCosts(US$/oz)
Cumulative Share (‘000oz)
2011
2012
2013
Q1 2014 (NB:
production data
annualised)
Total Cash Costs
Note: Q1 2014 gold production
has been annualised
36. M&A: Low but Improving
Deal values are
rising strongly
37. M&A in March Quarter
83% of
total
71% of
total
BUT still all
quiet on the
Africa front
Material drawn from SNL’s quarterly State of the Market: Mining and Finance Report.
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Summary of the global and African mining markets, in six sections.
Commodity prices climbed in 2010 after the recession of 2008 and 2009. Prices peaked in 2011 and fell throughout 2012 before stabilising somewhat over the past year.
Nickel has done best recently (thanks to export restrictions by Indonesia); circa $19,300/t ($8.77/lb)
Aluminum: $1,700/t ($0.77/lb)
Zinc: $2,034/t ($0.92/lb)
Lead: $2,070/t ($0.94/lb)
Uranium: $29/lb
Exploration expenditure follows metals prices (this graph excludes coal and iron ore). The indexed metals price shown here is weighted by the percentage of exploration expenditure dedicated to gold, copper, nickel and zinc. Exploration for all metals was down 29% last year at $15.2 billion.
Junior spending has been particularly hard hit. Their budgets (represented by the brown line) fell 39% year-on-year in 2013, with their share of overall exploration falling to 34% from an all-time high of 55% in 2007.
Grassroots exploration (that portion of exploration dedicated to discoveries away from producing mines) has been on a long-term downtrend. However, it picked up slightly to a third of all exploration last year after falling steadily in the past ten years from over 40%.
This graph shows average exploration budgets (cf revenue) for the largest producers. Overall budgets fell to 2.6% of corporate revenue in 2013, down from 3.5% the previous year (but still well above the low of 1.5% in 2004).
Latin America remains the most important region for overall exploration.
Map shows distribution of drilling activity during the past two years (based on projects reporting assays).
North America 29%, Latam 20%, Australia 19%, Africa 16%, Europe 9% and Asia 7%.
Regional split last year.
Exploration for gold has followed the metal price particularly closely.
LEADING Indicator ?!
More recently, the price of gold has collapsed, and drilling activity was already falling.
The chart illustrates the number of properties reporting drilling results each month.
As a result, there has been a sharp decline in projects reporting drilling results (quarter-on-quarter).
Resources discovered have been falling in recent years but new gold tonnages did increase in the December quarter, only to fall again in the three months to end-March.
Gold reserves (ie the more reliable deposit classification) have followed a similar trend to new gold resources.
In terms of projects where a mine development has been announced; only 95 projects were announced internationally* in 2013 (with planned life-of-mine capex of $38 billion), compared with 113 new projects (capex of $47 billion) in 2012, but there has been an improvement in capex commitments in the past three quarters.
* Excludes Russia, China and India
Costs worse in 2012 but improved in 2013 (and so far this year).
Number of deals dropped to 62 in the March quarter (76 in December quarter) but the value of these deals rose 66% to $11.9 billion in the three months to end-March.
Looking at deals; geographically, China and Canada dominated in the March quarter; with the activity focused on copper and gold.
Turning to financing: Barely 6% of the companies raised 85% of the capital in the March quarter.
There is a liquidity crisis for the junior companies.
Half of the industry has a market capitalisation of less than $10 million!