Ian Telfer: Consolidation to be a reality in coming years
While attending IMARC (the International Mining and Resource Conference) earlier this month, two themes emerged as the future focus of the resource industry: innovation and consolidation. I think these two critical factors will lead the mining industry into the next decade and beyond.
Consolidation will be especially important moving forward as we continue to see declining outputs at mines around the globe. The gold sector has been specifically affected by declining outputs. According to some estimates, gold mining supply may decrease by as much as one-third over the next ten years.
I don’t think there’s any surprise that we’ve seen more mergers and acquisitions among the world’s gold producers. As I mentioned in a recent Bloomberg article:
What we’ll possibly see is consolidation in the industry as a result, whether that’s a large company taking over smaller ones, a number of smaller ones getting together, or even two or three large companies being merged. No CEO wants to run a shrinking company.
I am not be alone in this assessment given recent moves by other companies to consolidate their operations with an aim toward dealing with a challenging production environment over the next decade. Notwithstanding the recent 10% slide in prices, the increase in gold’s value earlier this year has helped fuel business growth in the sector.
With output from global mines expected to dip in the coming years, many are investing in the commodity now in anticipation of a squeeze in supply over the next decade.
Like many of the other gold producers, Goldcorp has also been looking to acquire promising assets in this hemisphere and beyond. Earlier this year, we began the process of acquiring Kaminak Gold Corporation, a firm that owned the rights to the Coffee Gold project in Canada’s Yukon. The project consists of a structurally hosted hydrothermal gold deposit located roughly 130 kilometers south of Dawson, one of the Yukon’s largest centers. The Yukon itself is a top tier mining jurisdiction, making the high-grade, open pit, heap leach mining project especially attractive.
While the Coffee Gold project is one of Goldcorp’s most recent projects, it isn’t the only effort we are making to compete with declining global outputs. Made up of more than 60,000 hectares, the project has great potential as far as near-mine discoveries go. The current projected value of the Coffee Gold site is as follows: “total indicated gold mineral resources of 3.0 million ounces (63.7Mt at 1.45g/t) inclusive of total probable gold mineral reserves of 2.2 million ounces (46.4Mt at 1.45g/t), and total inferred gold mineral resources of 2.2 million ounces (52.4Mt at 1.31g/t).”
Needless to say, executives in the resource sector will need to be sharply attuned to production challenges going forward