A haul truck makes it way up the ramp at the Twin Creeks mine in Nevada, which is now operated by Nevada Gold Mines (NGM). Barrick Gold and Newmont partnered to form NGM in 2019. (Photo: Newmont)

In 2019, gold miners processed more ore to produce an annual increase in output, which for most was still below the average for the prior decade

By Jesse Morton, Technical Writer

Going strictly by the numbers in the corporate reports, last year was a big year for gold mining. And yet, it was a dud.

In 2019, in the months following the two biggest mergers in the history of gold mining, with absolutely soaring gold prices, the world’s biggest pure-play gold miners1 increased total gold output (TGO) by a whopping 10% year over year (yoy).

The group combined produced almost 30 million oz, about 2 million oz more than was produced in 2018, and easily the most in the last half decade. It is about a 4% increase over the average for the preceding five years (from January 1, 2014, through December 31, 2018).

Eliminating South Africa’s beleaguered Sibanye Stillwater, which saw its gold ops costs literally skyrocket, the average all-in sustaining costs (AISC) for the group fell by about 2% yoy, to roughly $930 per ounce (oz). Adjusted for inflation, that AISC is roughly the five-year average for the group. Relatively low average AISC would be due in part to the so-called synergies unleased by mega mergers and partnerships.

Meanwhile, the average price received for the group spiked a whopping 10%,
to close to $1,400/oz, which is about 12% higher than the five-year average
for the group.

Life after the mega merger. Total gold output shoots skyward after the world’s two biggest pure-play gold miners each acquire other top tier gold mining companies.

The roughly $500/oz margin was the highest going back more than five years and a staggering 21% increase yoy.

Thus, going by TGO, price and AISC, 2019 could easily be remembered as a banner year for the group. The back story is, however, that on average the group mined about 25% more rock and processed almost 15% more ore, just to raise TGO by 10%.

Worse, reality is that, despite the substantially higher prices, despite mining considerably more rock, only four of the 10 in the group actually produced more gold in 2019 than they did on average for the preceding decade. The theory of peak gold, while impossible to prove outright, lingers due to such numbers.

Nonetheless, a look at the box scores shows an industry that undoubtedly charged forward as prices spiked, and that is also beset by serious challenges, like declining grade and the related nagging costs.

The numbers also reveal the effort to seize on relatively high prices will likely continue through 2020, as about half of the group aims for a TGO above their average for the preceding decade.

Prices before the storm. Capping a four-year run, the average realized price for the group for 2019 nears $1,400/oz. With those prices, less than half the group was able to raise output above the average for the preceding decade.

Below, the group is ranked by TGO and their corporate reports summarized.

1. Newmont (6.4M oz)

According to corporate reports, Newmont reported a net income of $2.9 billion for 2019. In 2019, it paid down $1.2 billion in debt. It paid out $1.4 billion to shareholders through dividends and
share repurchases.

Newmont Mining reported a total gold output for 2019 of 6.4 million oz, up 17% yoy, up 26% over the average for the company for the previous five years, and up 25% over the average for the previous 10 years.

With an AISC of $966/oz, the company ranked in the middle of the pack. It was an increase of about 6% yoy, and an increase of about 4% over the average for the previous five years. Newmont processed about 205.2 million metric tons (mt), about 9% more ore yoy, significantly more than any of the rest of the group.

Part of the explanation for the amazing numbers is the company grew significantly last year. In January, it moved to acquire Goldcorp Inc., a company previously ranked in the top 10 globally for TGO. On April 18, 2019, the acquisition closed.

On July 1, 2019, Newmont and Barrick Gold partnered to establish Nevada Gold Mines LLC (NGM). NGM is owned 38.5% by Newmont, and owned 61.5% and operated by Barrick.

Attributable gold production for NGM, which includes the Carlin, Phoenix, Twin Creeks and Long Canyon mines, was roughly 700,000 oz.

The company reported new production elsewhere in North America at Éléonore, Porcupine, Peñasquito and Red Lake. That was partially offset by lower ore grade at the Cripple Creek & Victor (CC&V) mine. It also reported new production in South America at “Cerro Negro following the completion of the Newmont Goldcorp transaction and higher leach production at Yanacocha, partially offset by lower ore grade milled and lower recovery at Merian.”

Newmont reported “lower production from Australia due to lower ore grade milled at Kalgoorlie and Boddington, partially offset by higher mill throughput at Tanami.” It reported higher production from Africa thanks to higher grade ore milled and higher throughput at Ahafo.

Major highlights of 2019 included the completion of “four projects on four continents, on time and within budget, with internal rates of return of at least 15%: Tanami Power in Australia, Borden in Canada, the Ahafo Mill Expansion in Ghana, and Quecher Main in Peru.” Tanami Expansion 2 (Australia) received government approval. The project will extend to 2040 “the life of this world-class mine, which has produced more than 10 million oz since 1986.” In October, the board of directors approved full funding of the project. Autonomous haulage at Boddington received government approval. Also in 2019, Newmont divested its 50% interest in Kalgoolie Consolidated Gold Mines (KCGM) in Australia, which operated the Super Pit.

In 2019, the company reported project expenditures of almost $500 million, and sustaining expenditures of roughly $1 billion. The total of $1.5 billion was a roughly 40% increase yoy, and a 70% increase over 2017.

Newmont plans to spend roughly $230 million on exploration in 2020, down 13% yoy. For 2020, it expects to log roughly $1 billion in sustaining expenditures, and roughly $625 million in project expenditures. It reported it will produce roughly 6.4 million oz gold at an AISC of roughly $975/oz.

Newmont “had attributable proven and probable gold reserves of 100.2 million oz at December 31, 2019.”

2. Barrick Gold (5.5M oz)

Barrick Gold reported net earnings of roughly $4 billion. The company reported it halved its debt. It reported net earnings per share of roughly $0.51 for the year.

Barrick produced roughly 5.5 million oz gold, up 21% yoy, but down 1% over the average for the previous five years, and down 16% from the average for the previous 10 years.

Barrick reported an AISC of $894/oz, the third lowest in the group. That was up 11% yoy, and up 12% over the average for the previous five years.

To produce 21% more gold yoy, Barrick basically doubled the amount of ore it processed yoy. It also mined almost 90% more ore yoy.

Some of those numbers can be explained by the fact that the Barrick of 2019 is significantly larger than the Barrick of 2018. In the closing months of 2018, Barrick acquired Randgold Resources, which at the time was one of the world’s biggest pure-play gold producers. And, as mentioned, in 2019, Barrick partnered with Newmont to form NGM. In late 2019, Barrick also sold it interest in KCGM, a move which would only marginally impact 2019 gold production numbers.

Other major highlights of the year include the formation of a joint venture with the Tanzanian government, creating Twiga Minerals Corp. to “oversee the management of Barrick’s local operations,” to include Acacia Mining; the phase in of solar power at Loulo-Gounkoto, which produced 715,000 oz; and the coal-to-gas conversion of a power plant at Pueblo Viejo. Kibali produced 814,000 oz. Porgera produced almost 600,000 oz, up 39% yoy. Veladero produced roughly 550,000 oz, down 1% yoy.

For 2019, Barrick reported total capital expenditures of $1.5 billion, up about 11% yoy. It reported it expects total capital expenditures of as much as $1.9 billion in 2020. It expects to produce roughly 5 million oz gold with an AISC of about $945/oz.

Barrick reported that at the end of 2019 it had reserves of 71 million oz.

3. AngloGold Ashanti (3.3M oz)

AngloGold Ashanti reported a gross profit of $983 million, up roughly 27% yoy. It reported headline earnings of $379 million, which still translated to a $0.03 loss per share on the year. It reported adjusted net debt of $1.6 billion, down about 5% yoy. The company produced 3.3 million oz gold, down roughly 4% yoy, down roughly 14% from the average for the preceding five years, and down roughly 19% from the average for the preceding 10 years.

For 2019, the company reported an AISC of $998/oz, up roughly 2% yoy and up 1% over the average for the preceding five years.

AngloGold Ashanti processed roughly 56 million mt ore in 2019, down about 27% yoy. It also mined about 7% less
ore yoy.

In 2019, the miner managed to enter agreements to sell its South African assets and the Sadiola mine in Mali. It achieved first pour on time and within budget at Obuasi, where the Phase 2 ramp up is under way. Iduapriem (Ghana) produced 8% more gold yoy, reaching a record annual production of 275,000 oz despite downtime to repair a cracked trunnion journal on Sag Mill 2. Geita (Tanzania) produced 600,000 oz, an increase of 7% yoy, and hitting the highest level in 13 years. The pit there is transitioning to underground operations.

The rest of the operations either produced the same amount or less gold yoy for a variety of reasons, the main being lower grades in general.

For 2019, AngloGold Ashanti reported capital expenditures of $814 million, down roughly 13% yoy. Total sustaining capital expenditures were $436 million, down roughly 13% yoy.

The company expects to log close to $1 billion in total capital expenditures for 2020. It reported it expects to produce about 3.2 million oz of gold at an AISC of $1,070/oz.

At the close of 2019, AngloGold Ashanti reported reserves of 43.9 million oz.

At Blagodatnoye, Polyus moves 25 million m3 rock. The mine produced roughly 420,000 oz gold. (Photo: Polyus)

4. Polyus (2.8M oz)

Russia’s Polyus reported an adjusted net profit of $1.6 billion for 2019. Net debt was $3.3 billion, up 6% yoy. TGO was 2.8 million oz, up 16% yoy. It reported the board was considering a H2 2019 dividend of $3.5 per ordinary share.

For the sixth year in a row, Polyus ranks first in the group for lowest AISC. In 2019, it dropped $10/oz, to $594/oz, which is down 8% from the average for the preceding five years.

To raise TGO by 16% yoy, Polyus processed 16% more ore yoy. It also mined 54% more ore yoy.

In 2019, Olympiada produced 1.4 million oz, an increase of 5% yoy. To do so, it deployed 11 new haul trucks and a new hydraulic excavator. There the company continued a throughput capacity expansion project.

Similarly, at Natalka, the company executed debottlenecking tasks, adding four Knelson concentrators. It also deployed two haul trucks and a shovel. Natalka produced 405,000 oz in 2019.

Verninskoye, which produced 256,000 oz, an increase of 15% yoy, also executed tasks on a mill expansion project. Kuranakh continued fleet replacement and commissioned a thickener and adsorption line.

The mill at Blagodatnoye is in the process of having upgrades designed. It produced 420,000 oz in 2019.

For 2019, capital expenditures decreased to $630 million from $736 million, a drop of 14% yoy. “This decrease mainly reflects the lower capital expenditures at Natalka, which was fully ramped-up in 2018, and lower capital expenditures at Olimpiada and Blagodatnoye,” Polyus reported.

For 2020, Polyus expects to log capital expenditures as high as 750 million. It forecasts producing 2.8 million oz. The company reported reserves were 64.4 million oz.

Located above the Arctic Circle in Russia, Kupol produces roughly 130,000 oz gold in 2019, up 8% year over year due largely to the plant processing higher grade ore. For the year, the mine was the highest producer for Kinross behind Paracatu. (Photo: Kinross)

5. Kinross Gold (2.5M oz)

For 2019, Kinross reported adjusted net earnings of $422 million, which translates to about $0.35 per share. Debt and total liabilities were up only slightly yoy.

Kinross produced 2.5 million oz in 2019, up about 2% yoy, but down 5% from the average for the previous five years, and down about 2% from the average for the preceding 10 years.

For 2019, Kinross reported an AISC of $983/oz, among the highest in the group. That number is a slight increase over the average for the previous five years.

Kinross processed slightly less ore yoy in 2019; however, it processed about 10% more than the average for the preceding five years. It mined about 7% less ore yoy. Nonetheless, the amount mined was about the same amount of ore that it has mined on average annually for the preceding five years.

Highlights for 2019 include record annual production at Paracatu, with a TGO of 620,000 oz, “mainly due to an asset optimization program that improved mill efficiencies and enhanced the understanding of the orebody.” Tasiast also logged record production, up a whopping 56% yoy, and costs, “as the mine continued to benefit from the Phase One expansion and the mills strong performance.” Production increased 8% yoy at Kupol-Dvoinoye “primarily due to higher-grade ore processed.” Round Mountain saw the completion of the Phase W project.

Capital expenditures in 2019 were $1.1 billion, an increase of roughly 10% yoy. The company plans to log roughly $900 million in capital expenditures for 2020. It reported it expects to produce 2.4 million oz gold in 2020 at an AISC of roughly $970/oz.

Kinross reported that, as of the close of 2019, it had about 54 million oz in reserves.

6. Newcrest Mining (2.3M oz)

Newcrest Mining reported profits of $561 million for fiscal year 2019, which for the Australian company ended at the close of June 2019. It reported a net debt of $395 million, down 62% yoy. The company reported it paid out a small dividend on the fiscal year.

In the calendar year 2019 (ending December 31), Newcrest produced roughly 2.3 million oz of gold, down 3% yoy, down 2% from the average from the previous five years, and down slightly from the average for the previous 10 years.

Newcrest reported an AISC of $804/oz for the calendar year 2019, up 3% yoy, and up slightly over the average for the previous five years. It ranked second in the group for lowest AISC.

In the calendar year 2019, Newcrest mined about 8% more ore yoy and about 29% more ore than it mined on average annually during the preceding five years. It processed about 5% less ore yoy, and about 8% less ore than it processed on average annually for the preceding five years.

For fiscal year 2019, Cadia produced almost 1 million oz of gold at “a record low AISC of $132/oz,” the company reported. Lihir managed to hit a sustainable mill throughput rate of 15 million mt per year (mt/y) per year. “Telfer increased its gold production and improved its AISC” yoy.

In March 2019, Newcrest acquired a 70% interest in Red Chris mine in Canada. The transaction closed in August. In Q1, the company “entered a farm-in agreement with Greatland Gold for the Havieron tenement” near Telfer. Havieron could develop into an underground mine.

Newcrest logged capital expenditures of $531 million for fiscal year 2019, down roughly 2% yoy. It projects logging capital expenditures for fiscal year 2020 of as much as $780 million. The company reported it expects to produce in the range of 2.4 million oz gold in 2020 at an AISC in the range of $1,800/oz.

Newcrest reported that as of the end of 2018, the company had gold reserves of roughly 54 million oz.

7. Gold Fields (2.2M oz)

Gold Fields reported headline earnings of roughly $160 million, which translates to $0.20 per share. It reported a net debt of roughly $1.3 billion, down roughly $350 million yoy.

The miner produced 2.2 million oz in 2019, up 8% yoy, up 2% over the average for the previous five years, and yet down 7% from the average for the previous 10 years.

For 2019 for lowest AISC, Gold Fields ranks highly. It reported an AISC of $897/oz, down roughly 9% yoy, and down 10% from the average for the preceding five years.

The company processed about the same amount of ore yoy.

In 2019, the Gruyere project was completed, with commercial production achieved at the end of September. The environmental impact assessment for Salares Norte was approved in December, and the board received the feasibility study in February 2020. The company’s Ghana mines produced 840,000 oz in 2019. The Australian operations almost produced 1 million oz. The company reported a fatality at South Deep in H1 2019.

Gold Fields reported that in 2019, capital expenditures decreased by roughly 25% yoy to $613 million. It reported it expects capital expenditures in 2020 to be roughly $630 million. About $400 million of that will be sustaining capital expenditures. The lion’s share ($111 million) of growth capital expenditures will go to Salares Norte in 2020.

Gold Fields reported it expects to produce close to 2.3 million oz in 2020 at an AISC of roughly $930/oz.

The company reported that at the close of 2019, it had 50.2 million oz of gold equivalent reserves.

In 2019, Agnico Eagle gained approval for the Meliadine Phase 2 expansion in Nunavut, Canada. Above, the Meliadine Mill. (Photo: Agnico Eagle)

8. Agnico Eagle (1.8M oz)

Agnico Eagle Mines reported a net income for 2019 of $473 million. The company paid out a Q4 cash dividend of $0.20 per common share in March. “Agnico Eagle has now declared a cash dividend every year since 1983,” the company reported. It had total liabilities of $3.7 billion, up more than $300 million yoy.

The miner produced 1.8 million oz of gold in 2019, up 10% yoy, up 10% over the average for the preceding five years, and up 10% over the average for the preceding decade.

For lowest AISC, the company ranked in the middle of the pack in 2019. It logged an AISC of $938/oz, an increase of 7% yoy, and an increase of 10% over the average for the preceding five years.

The miner processed slightly less ore yoy, but processed 16% more ore than it processed on average annually during the preceding five years.

In 2019, the company gained approval for the Meliadine Phase 2 expansion. And it advanced the Amaruq underground project. LaRonde produced 403,000 oz. Meliadine produced 238,000 oz.

Total capital expenditures were $824 million in 2019, down roughly 18% yoy. Of that, roughly $314 million went to sustaining capital expenditures. The company reported it expects total capital expenditures of $740 million in 2020, of which $382 million will go to growth projects. The company plans to spend roughly $130 million on exploration.

Gold production is projected to be 1.9 million oz in 2020 at an AISC in the $1,000/oz range.

The company reported that at the close of 2019, it had reserves of 21.6 million oz.

9. Harmony Gold (1.4M oz)

For fiscal year 2019, South Africa’s Harmony Gold reported a net loss of roughly $150 million. It paid no dividend. It reduced net debt by $8 million yoy to $348 million.

For calendar year 2019, the miner produced 1.4 million oz of gold in 2019, down about 3% yoy, but up 18% over the average for the preceding five years, and up 11% over the average for the preceding 10 years.

For calendar year 2019, Harmony Gold reported one of the highest AISC/oz of the group, at $1,271, up slightly yoy, but up 8% over the average for the preceding five years.

For calendar year 2019, the company processed about the same amount of ore that it processed in calendar year 2018, but it processed almost 30% more ore than it did on average annually for the preceding five years.

For fiscal year 2019, the company reported a 17% increase in production at its Moab Khotson and Hidden Vally operations. That would be record production at the former. At Tshepong, gold production fell by 15% yoy, due to “a lack of flexibility, a result of the decline in the availability of stoping panels to mine. Production also decreased at Joel mine and Target 1 mine. At the latter “a capital efficiency project to move the ore and rock crusher, associated mining activities and services closer to the working areas, is under way to improve the overall efficiency and productivity of the mining circuit.”

Harmony reported it achieved “a 2% increase in underground grade mined.”

For fiscal year 2019, the miner reported capital expenditures of roughly $300 million.

The miner expects capital expenditures of $334 million for fiscal year 2020. It anticipates producing in the range of 1.46 million oz at an AISC in the range of $1,000/oz.

The company reported that as of the end of June 2019, its “attributable gold equivalent mineral reserves were estimated at 36.5 million oz.

10. Sibanye Stillwater (930,000 oz)

For H2 2019, Sibanye Stillwater reported headline earnings of $19.3 million. For the calendar year, it reported a loss of roughly $70 million. For H2 2019, gross debt was $1.9 billion, up 12% over H2 2018. For the year, the company reported earnings per share of $0.02.

In 2019, Sibanye Stillwater produced just under 1 million oz of gold. Production was down 20% yoy, down a whopping 35% from the average for the preceding five years. (Technically not a pure play gold miner, it produced almost 600,000 oz platinum.)

The company had the highest AISC of the group, at $1,544/oz, up 41% over the average for the previous five years. Such reflects the impact of a five-month strike and “reduced production volumes.”

For the sixth year in a row, Polyus posts the lowest AISC. Newcrest is runner-up for the second year in a row.

Meanwhile, in 2019, the company processed more than 50% more gold ore yoy. It basically doubled the amount of ore it processed on average annually for the previous decade.

The company reported that a solid operational recovery in H2 upped production numbers for the year after disruptions in H1. The big one was the strike, initiated by the union, started in November 2018, and resolved in April 2019. It was settled in the company’s favor, Sibanye Stillwater reported. “While the financial impact of the union strike was significant, we have consistently maintained that absorbing the strike impact was necessary for us to re-establish respectful and more cooperative relations with the union.”

It reported that its gold operations returned to profitability in H2 2019.

The company logged capital expenditures for 2019 of $235 million, including $141 million in growth capital.

Sibanye Stillwater reported it forecasts 2020 capital expenditures to reach as much as $230 million, with $16 million going to growth capital. It expects gold production to hit close to 1 million oz, with an AISC in the $1,400/oz range.

The company reported that as of December 31, 2019, it had gold reserves of 15.4 million oz.

In a league of their own: Newmont and Barrick stand well above the rest for total gold output. Less than half the group produced more gold in 2019 than their averages for the previous decade.

2020 Guidance

Newmont lists the top four factors influencing gold price as gold sales or purchases by central banks, their monetary policies, dollar strength and speculation.

Based on Newmont’s statements alone, it appears the conditions are right for a sustained rally in gold prices. As of press time, the U.S. Federal Reserve had dropped its key rates to zero in hopes of juicing liquidity across the economy.

Meanwhile, the U.S. federal government passed massive bailouts.

These inflationary responses should provide buoyancy for gold prices. Should is the key term. To make matters worse, a glut of oil has wreaked additional havoc on the market.

Yet, while the prospects for gold prices seem good, the prospects of a relatively stable and steady upward rise in prices is decidedly not, due to speculation in futures, mainly by the major financial houses historically in league with the Federal Reserve. History proves those financial houses, in a stocks crash, will quash gold prices via the futures markets. History shows they do it well.

For example, in September 2019, three traders from the precious metals desks at two major global financial houses were charged with, among other things, racketeering, after they spoofed futures markets to prompt what were effectively bear raids on precious metals during the stock meltdown of the Global Financial Crisis. The Department of Justice (DOJ) described their activities as a coordinated market manipulation scheme that launched in May 2008.2

“The defendants engaged in widespread spoofing, market manipulation and fraud while working on the precious metals desk at (JPMorgan and another major global bank) through the placement of orders they intended to cancel before execution in an effort to create liquidity and drive prices,” DOJ reported.

“In thousands of sequences, the defendants and their co-conspirators allegedly placed deceptive orders for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. and Commodity Exchange Inc., which are commodities exchanges operated by CME Group Inc,” DOJ stated. “By placing Deceptive Orders, the defendants and their co-conspirators allegedly intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets, and to deceive other participants in those markets into believing something untrue, namely that the visible order book accurately reflected market-based forces of supply and demand.”

According to the DOJ, they did it as an “enterprise,” thus the racketeering charge. This is to say it was a coordinated “scheme,” a “widespread” conspiracy, run by high-level people at a couple of the biggest banks in the world. It worked to “trick other market participants” en masse into “buying and selling precious metals futures contracts at quantities, prices and times that they otherwise likely would not have traded.”

In short, during the severe economic crunch, the big banks rigged the gold market. They did it for years. And when the law finally showed up, only three people had to fall on their swords.

This gig can easily be replicated today to rig not only the precious metals markets, but to fuel dead cat bounces in stocks, and to prop up the dollar (Federal Reserve Note). The latter two historically have an inverse relationship to gold.

Therefore, while a cratering global economy typically would boost gold prices, the template exists for major market rigging. However, as central banks turn to negative interest rates and bailouts, and as governments hand out fiat currency to pacify increasingly distraught populations, the long game may inevitably be a dollar (Federal Reserve Note) crash, followed by an attempt to return to some form of gold standard.

It should be noted that before the recent markets chaos caused by an oil glut and COVID-19, with prices having risen for four straight years, only half the group forecast 2020 TGO above their average for the preceding 10 years. It may be that no matter what gold prices do, some of the biggest pure-play gold miners in the world are simply incapable of seizing the opportunity and seriously boosting production.