the state of african mining - chris hinde, snl metals & mining
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The State of African Mining Speaker: Chris Hinde, Editorial Director, SNL Metals & Mining Mining On Top: Africa - London Summit 24-26 June 2014 | LondonTRANSCRIPT
The State of African Mining
Chris HindeMining on Top, London
June 25, 2014
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Overview
Commodity PricesExploration and Development Centres of African MiningProduction and Costs (Gold)Mergers and AcquisitionsFinancing
Bulk-Sector Prices
Recession bites
$92/t
$74/t
Thermal Coal FOB Richards Bay
Other Metals Faring Better
Worst over?
Exploration v Metals Prices
Exploration has been high (until recently) as drilling activity has followed prices for the past 25 years
Exploration: All Change
Majors
Juniors
Gov’t / Other
Intermediate
Recession: Juniors short of funds
No Funds: Grassroots Work Suffers
Grassroots
Late Stage
Minesite
Recession bites
Major Producers OK
Two-year blip during the recession
Regional Exploration Expenditure (10 Years)
15% share
Land area = 30m km2 (20%)
Drilling Announcements (past two years)
Africa = 16%
29%
9%
20%
19%
7%
Latin America26.7%
Rest of World16.5%
Africa16.5%
Canada13.3%
Australia13.1%
United States7.2%
Pacific/SE Asia6.7%
Worldwide Exploration (2013)
Similar share for Africa last year but big fall in Australia
Gold: Recent Decline
Result: Two-Year Global Slump
African Exploration
Focus on West Africa
Gold Drilling (Individual Prospects)
Q1, 2014: 13.5% share
New Gold Resources
Africa hard hit by withdrawal of juniors
16.3%
New Gold Reserves
Dreadful March quarter (as measured in mid-April)
8%
Other Exploration Activity
Project Locations
Feasibility Studies
AFRICAN FEASIBILITY STUDIES (2013 and Q1 2014)
Feasibility Study (US$m)Country Project Commodities Significant Owner Capital Cost NPV
Burkina Faso Balogo Gold Golden Rim Resources Ltd 40.2 47.5
Banfora Gold Gryphon Minerals Ltd 125.1 154.0
Hounde Gold Endeavour Mining Corp 403.0 230.0
Nami Gold True Gold Mining Inc 171.5 178.2
Congo (DRC) Dikulushi Copper, Silver Mawson West Ltd 10.1 3.0
Kipoi North Cobalt, Copper Tiger Resources Ltd 755.0 Congo (Republic) Hinda Phosphate, Uranium Cominco Resources Ltd 563.0 2,010.0 Eritrea Gupo Gold Sunridge Gold Corp 403.0 443.0 Ethiopia Nova (Danakhil) Potash Allana Potash Corp 642.0 1,320.0 Ghana Esaase Gold Asanko Gold Inc 286.4 354.7
Prestea Gold Golden Star Resources Ltd 150.1 114.0 Guinea Nimba Iron ore Sable Mining Africa Ltd 299.3 Liberia Kokoya Gold Amlib Holdings plc 35.0 45.4 Mali Fekola Gold Papillon Resources Ltd 269.3
Syama Gold Resolute Mining Ltd 85.6 Morocco Achmmach Tin Kasbah Resources Ltd 252.0 126.0
Zgounder Silver Maya Gold & Silver Inc 3.8 36.2 Namibia Luderitz ML111 Diamonds Afri-Can Marine Minerals Corp 11.1 25.3
Omitiomire Copper International Base Metals Ltd 38.5 12.0Otjikoto Gold B2Gold Corp 244.2 243.4
Niger Madaouela Molybdenum, Uranium GoviEx Uranium Inc 646.0 251.0 Nigeria Agbaja Iron ore, Magnetite Kogi Iron Ltd 497.1 420.0 Senegal Gora Gold Teranga Gold Corp 50.0 105.0
Kourouloulou Gold Teranga Gold Corp 504.7 558.0 Sierra Leone Baomahun Gold Amara Mining plc 143.0 50.0 South Africa Makhado Coal Coal of Africa Ltd 406.3 697.0 Zambia Dunrobin Copper, Gold, Iron ore Luiri Gold Ltd 21.0
Kitumba Copper, Gold, Uranium Blackthorn Resources Ltd 357.7 108.0
Source: SNL Metals & Mining 6,659.0 8,286.6
2817 US$6.7b
nUS$8.3bn
Global Development Projects
Numbers continue to fall but capex rising (at last)
*
*Reason for increased consultancy activity?
*
Development Projects
Flat NPV, overall, for the past year
Africa: Mixed and low
Planned Development Spending
Production: Mined Revenue
African Gold Production
AFRICAN SHAREExcluding by-product gold and artisanal output, the continent contributed 14% of the global mined supply of 97Moz in 2013.
African primary gold production exceeded 13.7Moz last year (under 13.4Moz in 2012).
The continent yielded 3.53Moz in the quarter to end-March, compared with 3.17Moz in the year-ago quarter, 3.29Moz in Q1 2012 and 3.34Moz in Q1 2011.
African Gold Production
NATIONAL RANKINGSouth Africa's share of the African total fell from 39% in 2011 to 35% in each of the past two years (and only 32% in the quarter just ended).
Nevertheless, with almost 4.9Moz in 2013, South Africa remains easily the continent's largest primary gold producer.
Ghana was in second place last year (2.85Moz), followed by Mali (1.42Moz), Tanzania (1.17Moz) and Burkina Faso (0.77Moz).
African Gold Production
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2011 2012 2013 2014
0
2
4
6
8
10
12
0
200
400
600
800
1000
1200
1400
1600
1800
2000 South Africa
Zimbabwe
Tanzania
Suriname
Sudan
Niger
Namibia
Mauritania
Mali
Guinea
Ghana
Egypt
Eritrea
Côte d'Ivoire
Burkina Faso
Botswana
Gold price
Gold
pro
ducti
on (o
z)
Gold
pric
e (U
S$/o
z)
Black line = Gold price(right-hand scale)
African Gold Production
NEW GOLD MINESThese 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
Cost of African Gold
AFRICAN COSTSBased 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.
Cost of African Gold
0
500
1000
1500
2000
2500African Gold Mine Cash Costs (2013)
South AfricaOther AfricaAverage 2013 Gold price: US$1393/ozAfrica Total Cash Cost: US$881/ozSouth Africa average cash cost: US$1184/oz
Cumulative Share (% gold)
To
tal
Ca
sh
Co
sts
(U
S$
/oz)
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)
Cost of African Gold
0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400 2011
2012
2013
Q1 2014 (NB: production data annualised)
Gold price: US$1300/oz
Cumulative Share (‘000oz)
To
tal
Ca
sh
Co
sts
(U
S$
/oz)
Total Cash CostsNote: Q1 2014 gold produc-tion has been annualised
M&A: Low but Improving
Deal values are rising strongly
M&A in March Quarter
83% of total
71% of total
BUT still all quiet on the Africa front
Capital Raising
85% of total
Continued cash crisis for juniors
Exploration Capital Raising
Not much, and it isn’t for Africa
Dire Global Mining Market (end March)
57%
21%
6%
16%
