After enduring a challenging period, Australian gold producers are poised for a resurgence as the gold market rebounds. Unlike their North American counterparts who saw increased investment in battery metals, Australian gold miners are now attracting attention once again.
With the lithium boom cooling and the local nickel market in decline, gold is regaining favor. The Australian dollar gold price has surged to over A$3,600 ($2,358) per ounce, setting record levels and reinvigorating the sector.
The optimism was palpable at the Noosa Mining Investor Conference in Queensland in July, where mid-tier gold producers, including Ramelius Resources, showcased their renewed confidence. “It’s fair to say, it’s a great time to be a gold producer,” remarked Ramelius managing director Mark Zeptner. This positive outlook contrasts sharply with two years ago when escalating costs squeezed margins despite rising gold prices.
Evolving fortunes in the gold sector
The fortunes of Western Australia’s gold sector are closely linked to the state’s dominant iron ore industry. When iron ore prices are high, the demand for skilled labor often diverts resources away from lower-margin gold operations. This was especially problematic during the COVID-19 pandemic, which exacerbated labor shortages in WA.
However, recent improvements have eased labor and cost pressures. Zeptner noted, “The labor and cost pressures that hit the WA mining industry during the pandemic have eased more recently.”
Cash flow and profit margins on the rise
In early July, several gold producers, including Ramelius, Capricorn Metals, Red 5, Westgold Resources, and Regis Resources, reported improved cash flow for the June quarter. Ramelius saw its margins reach a record 48% in FY2024, projected to rise to 55% in FY2025. The largest Australian producers, Northern Star Resources and Evolution Mining, reported record net mine cash flows for their respective periods.
Despite inflationary pressures of approximately A$110/oz, Evolution’s CEO Lawrie Conway highlighted that the company’s cash flow increase outpaced metal price movements. “The gold price is certainly beating off the inflationary impact on our cost base,” Conway stated.
Cost pressures and future projections
Northern Star’s all-in sustaining costs (AISC) for FY24 were A$1815/oz, with FY25 guidance indicating AISC could rise to A$1850-2100/oz. Managing Director Stuart Tonkin acknowledged potential cost savings from reduced inflationary pressures and energy costs, but cautioned that gold price increases might lead to higher AISC.
Evolution’s upcoming FY25 guidance includes a projected 5% increase in labor costs, with additional costs due to higher superannuation contributions.
Shifts in labor market and industry dynamics
Labor shortages, particularly during the pandemic, affected mining operations. Evolution’s Mungari operation in WA experienced high staff turnover but has seen improvements recently. Northern Star is also benefiting from reduced labor vacancy and turnover rates due to the closure of multiple nickel mines.
Juniors like Ora Banda Mining are also seeing benefits. Former Northern Star COO Luke Creagh, now running Ora Banda, noted that attracting workers has become easier. “We’re through the fixing stage – the next 12 months is when we really start generating strong cashflows from the underground,” he said.
Challenges and failures in the sector
Despite the sector’s recovery, some companies have struggled. High-cost mines have closed, and firms like Calidus Resources have collapsed. Ora Banda, which has faced skepticism, is now poised for growth with rising production and decreasing costs, benefiting from the strong gold price.
Creagh expressed optimism about the future, “The gold price is awesome and it looks strong for the foreseeable future, which is great for the gold companies.”
As Australian gold miners navigate a changing landscape, the sector’s recovery and the record gold prices offer a promising outlook for the industry.
