August 2021
Robust gold prices and the precious metal's assured role as a safe haven is encouraging miners to invest in their operations to halt output declines, extend mine life and grow production. AME expects gold demand to grow at a compound annual growth rate of 0.6% over the medium-term to 151,303koz by 2025. We expect mine gold supply to slide at a CAGR of 3.8% to 94,115koz over this period.

AME's base case of expansions coming online over the medium-term includes operations by Newmont, Equinox Gold, Agnico Eagle Mines, AngloGold Ashanti, Eldorado Gold, Wiluna Mining and Evolution Mining.



Newmont has approved full funding for its Ahafo North project to expand its footprint in Ghana. The project, which includes four open pit mines and a 3.7Mtpa mill, is located 30km from the company’s Ahafo South operations. "The development of this prolific orebody will leverage our proven operating model and will be supported by our existing world-class Ahafo South operation," said Newmont CEO Tom Palmer.

The project is expected to add between 275koz-325kozpa with AISC between US$600-$700/oz for the first five full years of production (2024-2028). Project capex is estimated to between US$750-$850m with a construction set to be completed in the second half of 2023 and commercial production in early-2024. At current gold prices, the project is expected to deliver more than a 30% IRR, Newmont said.

Ahafo North has 3.5Moz of Reserves and more than 1Moz of Measured and Indicated and Inferred Resources and significant upside potential to extend beyond its current 13-year mine life, according to Newmont. The project will create 1,800 jobs at peak construction with more than 550 permanent roles once operational.

Newmont's Tanami Expansion 2 project in the Northern Territory will extend mine life beyond 2040 to increase production by around 150-200kozpa for the first five years. This will be achieved via a new 5.4m hoisting shaft that can reach 1,460m below surface depth and supporting infrastructure. Annual capacity of the processing site will be lifted to 3.5Mtpa from 2.6Mtpa.

Newmont said the expansion would reduce operating costs by approximately 10%. Capex is estimated to be between US$850-$950m with a commercial production set to begin in the first half of 2024. Since 1986, the mine has produced more than 10Moz of gold from various open pits and underground mines. Newmont is aiming to produce 7Mozpa across its operations from 2024.


Equinox Gold

At Equinox Gold's Los Filos expansion project in Mexico, the company has been developing additional open pit and underground mines. The expansion involves enlarging the open-pit, adding a new open pit (Guadalupe), developing a second underground mine (Bermejal), and constructing a new 8ktpd carbon-in-leach (CIL) plant to complement the existing heap leach facilities.

The 2019 feasibility study outlined average annual production of 350koz at an AISC of US$694/oz. Initial expansion phase capex was estimated at US$213m and US$180m to develop Bermejal and CIL plant. It has an NPV of US$679m (5% discount) and IRR of 86% at a US$1,250/oz gold price. Los Filos produced 27,079oz in the June quarter at an AISC of US$1,026/oz, with Equinox spending US$7m in sustaining capital. It is located 180km south of Mexico City in Guerrero State.

Illegal blockades at Los Filos during the June quarter slashed full-year guidance by 50koz. Mining activities restarted in the Bermejal and Guadalupe open pits at the end of July and AISC is expected to be lower in the second half of the year, the Canadian miner said. Loz Filos is expected to produce between 120-140koz this year at an AISC of US$1,790-1,850/oz.



Equinox is advancing an expansion at its Castle Mountain gold mine in California, US, that will increase production to more than 200kozpa, from 40kozpa. The mine produced more than 1.3Moz of gold from 1992 to 2004, when production ceased due to low gold prices. It recommenced operations, known as Phase 1, in November last year.

Castle Mountain produced 6,128oz in the June quarter at an AISC of US$1,026/oz, and Equinox spent US$1.2m in sustaining capital. The miner said it continued to optimize the leach pad and plant and daily production has doubled. Castle Mountain is expected to produce between 20-30koz at an AISC of US$1,590-1,640/oz.



Permitting of the Phase 2 expansion to 218kozpa is set to start in the second half of this year, with the completion of a feasibility study. The company has outlined an AISC of US$858/oz with average annual cash flow at US$114.1m, and an initial capex of US$389m, excluding US$121m for mining fleet lease. Phase 2 would produce 3.2Moz over a 14-year life, with expansion potential. It has an after-tax NPV (5% discount) of US$640m and an after-tax IRR of 18% at a gold price of US$1,500/oz.

In terms of new projects, Equinox is set to start commissioning its Santa Luz by year end with pour first gold due in the March quarter of 2022. "With a strong balance sheet and robust cash flow from seven producing mines, we remain focused on our growth strategy toward one million ounces of annual gold production," said CEO Christian Milau.


Agnico Eagle Mines

A major expansion at Agnico Eagle's Kittila mine in Finland was completed last year and ramp up to full capacity of 2Mtpa is ongoing. The sinking of a 1,044m deep shaft as part of the expansion faced delays due to the pandemic and commissioning is now expected to be completed during the first half of 2022 at a cost of EUR190-200m (US$225-237m).

The expansion is expected to increase the efficiency of the mine and decrease or maintain current operating costs. The mine is the largest primary gold producer in Europe, and it hosts the company’s largest mineral reserves. Commercial production began in 2009, with open-pit mining completed in 2019, it is now an underground-only operation. With a mine life estimated through 2034, Kittila is Agnico's longest-life mine. It has proven and probable mineral reserves contain 4.1Moz (30Mt grading 4.16 g/t gold) as of December 31, 2020. Kittila is expected to produce 250koz this year, up from 208,125oz in 2020, at a cash cost of US$760/oz, down from US$816/oz last year.



AngloGold Ashanti

Phase two of AngloGold Ashanti's Obuasi Redevelopment Project—involving the ramp up from 2ktpd to 4ktpd of ore mined and processed—has been delayed following a worker fatality in May.

Underground mining was suspended following the sill pillar failure incident to allow for the investigation and third-party review of the mine plan, schedule and ground management plan. A restart is expected towards the end of the year, the Johannesburg-listed miner said.

By the end of March, the Obuasi Redevelopment project was 97% complete. Phase two involves the refurbishment of the underground materials handling system, shafts and ventilation, as well as a substantial rebuild of the processing plant. After Phase two comes online, the operation is then expected to ramp up to 5ktpd over the following three years.

In the first half of the year, Obuasi produced 85koz of gold at an AISC of US$1,316/oz. Obuasi poured its first gold in December 2019 after Phase-one, which began in mid-2018, was completed. The mine was previously placed in care and maintenance in 2016.

Despite well over a century of sustained mining, Obuasi has an estimated 8.7Moz gold in reserves and 29.5Moz of mineral resources, which could comfortably sustain mining for well over the next two decades. AngloGold  expects production in the first 10 years to average between 350-400kozpa, while production in the following 10 years is forecast at between 400-450kozpa. The average gold grade at Obuasi is between 8-10g/t, with sections within the ore body averaging as high as 16g/t.


Eldorado Gold

Eldorado Gold is looking to increase heap leap recoveries and extend mine life at its Kisladag gold mine in Turkey. Eldorado invested US$29.4m in Kisladag in the June quarter related to waste stripping and construction of the north leach pad to support the mine life extension. Completion of phase one is expected in mid-2022. Spending also included installation of a high-pressure grinding roll (HPGR) circuit, which is expected to improve gold recovery by around 4% with commissioning now scheduled to start in the December quarter.

Turkey's largest gold mining operation is a low-grade, bulk-tonnage, open pit operation that uses heap leaching for gold recovery. The mine, located in Usak Province, is expected to mine and place on leach over 11 Mt of ore at an average grade of 0.69 g per tonne. “In line with our growth strategy, we are investing capital into our operations, particularly at Kisladag and Lamaque, to deliver value from our portfolio of assets," said Eldorado CEO George Burns during the June-quarter earnings release.

Kisladag produced 226,475oz in 2020, jumping 61% from the previous year following the restart of full operations in April 2019. However, ASIC at Kisladag rose 12% on-year to US$664/oz, due to decreases in the average grade of ore placed on the heap leach pad.  During the first six months of 2021, Kisladag's output slipped 18% to 90,188oz due to a planned shift to lower grade ore, Eldorado said.



Turning to Eldorado's expansion at its Lamaque underground gold mine in Canada—the decline connecting the Sigma mill with the Triangle underground mine is progressing on schedule. It is expected to be complete in the December quarter, with Eldorado investing US$8.9m in the June quarter.

The decline is expected to reduce operating costs as surface haulage costs are eliminated and the current up ramp underground route is replaced with straight line haulage to the Sigma mill. Eldorado said the Lamaque PEA is expected in the March quarter of 2022, which will take into considerable an improved operating outlook.

Lamaque produced 144,141oz of gold in 2020, rising 27% on-year, while ASIC fell 23% on-year to US$827/oz. In the first half of the year, Lamaque produced 64,478oz, up 6% on-year at an AISC of US$908/oz, up 22% on-year on higher sustaining capex.

Across all operations, Eldorado is maintaining its 2021 annual production guidance of 430koz-460koz of gold at an AISC of US$920-1,150/oz sold.


Wiluna Mining

ASX-listed Wiluna Mining is steadily progressing its “stage one” expansion program at Wiluna operation in Western Australia—designed to double production to 120kozpa. It involves the transition from the existing 2.1Mtpa conventional CIP plant to treating sulphide ore through a 750ktpa capacity flotation concentrator that is under construction. Stage one is expected to be in commercial production in 2022, after kicking off in the December quarter of this year.

The capital cost of the stage one expansion has been previously put at A$70m (US$50.3m), consisting of about A$25m (US$18m) for the new concentrator and about A$45m (US$32m) for underground mine development, other capital works and reserves drilling. Subsequent stages will aim to increase the production rate out to around 250kozpa—more than four times the current rate.

“Pending a successful outcome of the stage-two feasibility study, stage-two development will commence by the middle of 2022,” executive chair Milan Jerkovic said. Wiluna has underground ore reserves at 4.33Mt at an average grade of 4.74 g/t for 660,700oz of contained gold. Drilling is expected to lead to an update at the end of the year. Wiluna’s current indicated and measured resource estimate comes in at 12.6Mt grading an average 5.26 g/t for 2.14Moz.

The Perth-based company reported June quarter production of 12,524oz at AISC of A$1,371/oz (US$986/oz), taking the full fiscal year production total to 51,552oz at AISC of $1,794/oz (US$1,291/oz).


Evolution Mining

ASX-listed Evolution Mining is pursuing expansions at Cowal in Australia and Red Lake in Canada, with the aim of lifting gold production to 900koz by fiscal 2024. “Both operations demonstrate outstanding organic growth opportunities within Evolution’s portfolio that will grow production by 35% to over 900koz of low-cost gold over the next three years,” said chairman Jake Klein.

Evolution last month approved an underground expansion at Cowal, located in New South Wales, to boost production by ~70% to 350kozpa, lower AISC by ~28% and extend mine life beyond 17 years (+2032).

The feasibility study outlined capex at A$38m (US$28m), IRR at 15% (A$2,200/oz), payback of 8 years and life of mine production at 1.7Moz. First ore is expected from the Cowal’s underground mine by mid-2023, with paste plant commissioning expected to occur at the same time. Cowal produced 52,323oz of gold at an AISC of A$1,106/oz in the June quarter.

The Evolution board is also investing in its Red Lake gold mine in Canada to boost gold production to more than 350kozpa by fiscal 2026—compared to 126,339oz in fiscal 2021—and extend mine life by more than 15 years. Evolution said last month that it would spend between A$465m (US$341m) and A$530m (US$389m) on “major capital” projects at Red Lake in the next three years.

Evolution said that stage one to produce 200kozpa at an AISC of less than US$1k/oz remains on track with the operation achieving production and cost guidance in the fiscal 2021. The operation consists of the Red Lake, Campbell, Cochenour and the recently acquired Bateman mine following the A$345m (US$253m) Battle North Gold Corporation acquisition in May, to help turn it into a profitable operation. Red Lake produced 30,182oz of gold in the June quarter at an AISC of A$2,233/oz, which means all-in costs are slightly more than double that of Cowal.

The development of the Campbell Young Dickenson decline is planned to enable 750ktpa of ore to be mined from Upper Campbell in 2024, which will ramp up to over 1Mtpa by 2026. Development work at McFinley will take place in 2022 to support a bulk sample. The company is working on a study to expand capacity at the Campbell mill to more than 1.5Mtpa over the next three years. Same goes for the Bateman mill, with plans to expand to 900ktpa beyond 2024, giving Evolution combined milling capacity at Red Lake to more than 2Mtpa.

The growth will not come cheap, however, given the company's plan to invest about half a billion dollars in each of the next two years on expansions and improvements, with up to A$360m (US$264m) of further capital spending in fiscal 2024. Evolution produced 680,788oz of gold in fiscal 2021, down around 20% compared to fiscal 2017 and the fourth consecutive year of lower gold production.