Follow the money is one of the oldest adages in business, journalism and even lawmaking.
But as old as it is, it is a reliable guide for what is popular and what the crowd thinks, especially in investment.
Sometimes the crowd becomes a flock of sheep and any guidance from their direction become useless, but mostly there’s a grain (or gram) of truth in the path of the flock.
Take gold, where the flock has been more than a bit confused in 2021 after 2020’s record surge and then sobering slide.
2020 saw gold hit an all-time high of $US2,051 an ounce in August last year.
This year it has struggled to hold the $US1,800 an ounce level and is down nearly 5% compared to the S&P’s 20% gain and the ASX 200’s 14% rise.
Luckily that is not what can be said about the quarterly exploration data issued by the Australian Bureau of Statistics this week – it shows gold in a very different light.
The June quarter data confirms not only that gold is where the mining and exploration crowd is heading, but the production data for the June half further confirm the positive story from the exploration data.
The ABS data showed that gold exploration activity rose 41% to $430 million in the June quarter.
For the year to June as a whole, spending on gold exploration jumped 31% to $1.53 billion from $1.16 billion in 2019-20.
Total exploration spending (seasonally adjusted rose 35 from the March quarter to $878.3 million.
That took total exploration spending for the financial year to June 30 to a seasonally adjusted $3.17 billion, up 4400 million nor 14% from 2019-20’s $2.77 billion.
The June quarter’s gold exploration spending was 21% more than the $356 million spent in the same quarter of 2020 when mining companies were forced to cut activity in Covid lockdowns.
The ABS data also reveals where the crowd isn’t heading – petroleum exploration spending fell a third from the December quarter of 2019 ($376 million) to $249 million in the June, 2021 quarter and coal exploration spending dropped by a third from the $87.2 million in the June, 2020 quarter to $55 million in the latest quarter.
In another sign of where the crowd is heading, copper exploration spending rose 44% over 2020-21 to $120 million as the likes of BHP (Oak Dam), Rio Tinto (Winu), Newcrest (Cadia, Cadia East), Evolution (Lake Cowal), Chalice Mining (near Perth) and OZ Minerals (Prominent Hill, Carapateena, West Musgrave) spent more, plus a host of smaller players (such as IGO).
Meanwhile half year and June quarter data from Surbiton Associates reveals that Australia again moved past China as the world’s largest gold producer for the first half of the year.
The US Geological Survey has listed China as the world’s largest gold producer since 2007, with Australia remaining the second largest producer.
But Surbiton said that in the six months to June 2021, Australia produced 157 tonnes of gold, which was four tonnes higher than the China during the same period.
Surbiton Associates director Dr Sandra Close said reports from China found that gold output was impacted by work accidents that caused shutdowns during investigations while Australian mines lifted output despite restrictions imposed by Covid
“Australia’s gold production was 321 tonnes for the financial year 2020-21 and was worth around $26 billion at the current gold price of some $A2,500 per ounce,” Close said in a release this week.
But Australian production in the year to June was down seven tonnes compared to the previous financial year’s record high of 328 tonnes.
Gold production rose 12% in the June quarter to 83 tonnes from 74 tonnes in the March quarter.
The World Council said in its half year report last month that there was a 3% dip thanks to lower output at Cadia Valley in NSW (Newcrest) and Fosterville in Victoria (owned by Kirkland Gold of Canada) in the half.
The WGC said China saw a 5% fall in mine production after safety-related stoppages in Shandong province in the March quarter continued to affect operations in the second quarter.
Dr Close said existing and new operations across Australia upped the gold output in June.
This included Kirkland Lake’s Fosterville mine in Victoria. New operations including Capricorn Resources’ Karlawinda project in Western Australia also came on stream in the June quarter as it ramps up to its 100,000-ounce annual production rate.
Australia’s biggest producing gold mine for the 2020-21 financial year was Newcrest Mining’s Cadia East operation in NSW, which produced 764,895 ounces. Newcrest has plans to spend $1.3 billion expanding Cadia with a new block cave.
Newcrest is spending over half a billion dollars on moves to expand the Telfer mine ahead of the final greenlight for the Havieron project nearly (with Rio’s Winu prospect also close).
OZ Minerals is looking to spend more than $1 billion on a new underground mining operation at its Prominent Hill open cut in South Australia.
