growthofthegoldindustry“hasalmost
been maligned as indicating the inability
to ind new deposits, however, the same
statisticscouldbecelebratedasanexample
of perseverance and insight into recognising
commercially sensible opportunities and
developing them. he perceptions of
declining discovery have arisen from some
poor understanding of the importance of
brownields growth”.
He argues that government data on
Australia’s economic demonstrated resource,
whichisthesumofreservesplusmeasured
and indicated resources, stood at 9000
tonnes in 2015, or 30 years of current
production, and has rarely fallen on a year-
on-year basis since 1979.
So how does Richard Schodde arrive
at his forecast? he irst point to make is
the MinEx Consulting report is agnostic
in terms of the source of the gold. It does
not diferentiate between greenields and
brownields exploration.
More speciically, the report acknowledges
that resources do grow over time. Schodde
has quantiied this trend by looking at the
change in known pre-mined resource for 27
gold operations in the years following mine-
start-up. He found that ater 25 years of
mining, the known pre-mined resource of a
given deposit is, on average, 1.65 times larger
than that originally reported at start up.
Importantly, this igure is net of
adjustments to the resource size associated
with changes in the reported head grade
and resource grade over time. hese can
havealargeefectbuthavenothingtodo
with exploration success. hey are functions
of higher gold prices – good luck – and
improvements in mining and processing
costs (good engineering).
Schodde provides sensitivity analysis in
his report that shows halving the cut-of
grade will increase the available ore tonnes
byafactoroffouranddoublethereported
ounces.
hesearehugeswingsthatmeana
signiicant decrease in the gold price could
wreak havoc in the government’s EDR igure
for the nation’s gold resources.
Conversely, strong growth in the gold
price can give a huge boost to resources and
reserves. For example, the AusIMM paper
looksatthegrowthfor12golddeposits
between 1990 and 2016. Endowment – the
current reported resource plus cumulative
historic production – grew by 2.74 times,
however, the gold price surged over that 26-
year period.
Price growth above the rate of inlation
allowed an almost 50% decrease in cut-of
grades, which would double the reported
resource based on Schodde’s sensitivity
analysis. Most of the growth in endowment
of those 12 gold deposits was due to a higher
gold price rather than genuine exploration
success.
By stripping out these head grade and
resource grade efects, Schodde was also
able to show that resource growth of the 27
existing mines he studied slows down over
time. he opportunity for mature mining
operations to continue to grow is limited.
Inotherwords,evengreatgoldminessuch
astheSuperPitatKalgoorlieandTelferin
the WA Pilbara, do not last forever.
In fact, Schodde’s exhaustive modelling
foundthatmostofAustralia’sexisting
gold mines will close within the next two
decades, including the Super Pit. hat is an
alarming statistic given the weighted average
delay between discovery and development is
13 years.
So if brownields can’t save the gold
industry from a serious decline in
production in the medium to long-term,
what about greenield exploration? here
have been some major greenield discoveries
since 2000, including Tropicana and
Gruyere, so why can there not be more?
Schodde’s forecasting the total
contribution of exploration success to future
gold resources and production essentially
takes the industry on its overall greenields’
and brownields’ record.
His model forecasts that exploration
spending, which is closely correlated with
the gold price, will peak at $694 million in
2021, a 7% increase compared to 2017, and
then average $677 million a year over the
long term.
Calculating the number of ounces to be
discovered is then as simple as dividing
spending by the real cost of discovery per
ounce, which is A$70 in 2017 and inlating it
by A$10 per ounce in each decade.
he net result is the likely addition of 4.
million ounces of gold production every
year by 2057, or almost half current total
production.
Unfortunately, only four of Australia’s
existing 71 gold mines will still likely be
operating by that time — Olympic Dam and
three from a group of six possible contenders- Cadia East, Central Murchison, Charters
Towers, Plutonic, Southern Cross and South
Kalgoorlie.
he unavoidable conclusion is that,
based on our exploration performance, the
industry is headed for a major fall.
All mines are inite and we are not making
anywhere near the number of discoveries to
sustainanindustrypumpingoutabout
tonnes of gold every year.
WeneedtoindatleastseveralTropicanas,
which was discovered more than a decade
agoandisthemostrecentTier1discovery
of any commodity in Australia.
Schodde concludes that to maintain
production at current levels in the longer
term, the industry will either need to double
the overall level of exploration expenditures
or double its discovery performance. hat is
halve discovery costs from A$70 to A$35 per
ounce.
However, he adds that the opportunity
exists for industry and government to take
theinitiativetoinventitsownfuture.
“In addition to developing policies
that encourage/stimulate exploration, the
opportunityalsoexiststobemoreeicient
and efective at making discoveries,” Schodde
said.
“he challenge is that many of these
initiatives require efort, and money, and will
take several years to bear fruit.”http://www.miningmonthly.com December 2017 AMM 15
ADVANCING EXPLORATIONA chart showing a possible gold future for Australia.MinEx Consulting’s Richard Schodde
believes the gold industry could be facing
a bleak future.