The suspension of mining activities in the second quarter to prevent the spread of coronavirus infection will lead to a decrease in global gold production by 1.7% by the end of 2020, experts of GlobalData are sure.
According to the analyst firm, all the largest gold mining companies in the world: Newmont, Barrick Gold, AngloGold Ashanti and Newcrest Mining, expect production cuts this year due to restrictions and strict quarantine measures, especially in South Africa.
“However, uncertainty and fears of a possible global economic downturn have pushed gold prices to a record high in August 2020, and they remain at around $ 2,000 an ounce, supporting profit growth for gold miners despite declining production,” said senior mining analyst Industry GlobalData Winnet Bajaj.
The COVID-19 pandemic has prompted two of the world’s largest gold miners, Newmont and Barrick Gold, to cut production targets from a combined 11.6 million ounces to about 11 million ounces. Their production in the second quarter has already more than halved to 1.4 Moz from 2.9 Moz in the second quarter of 2019.
According to GlobalData, the cut in production followed a temporary suspension of operations for most of April and May this year due to restrictions caused by the pandemic at Barrick’s Veladero and Porgera, as well as at Newmont’s Cerro Negro, Yanacocha, Eleonore, Penasquito and Musselwhite. In addition, AngloGold Ashanti and Kinross Gold have withdrawn their production forecasts for the year, and it is not clear how much lower their new forecasts will be.
At the same time, the largest gold producer in Russia, Polyus, has not given up, and has not yet changed its plans for 2020.
Restrictions due to COVID-19 in South Africa in the first half of 2020 led to a drop in production of AngloGold Ashanti by 63 thousand ounces compared to the same period last year, and the total decrease in the company’s production in the first half of 2020 was 85 thousand ounces.
“Other factors that influenced the production dynamics of the leading companies in 2020 were the low gold grade in the ore processed and the sale of assets,” Bajaj said. “At Newcrest, production decreased due to the sale of the Gosowong mine to Indotan Halmahera in March. And Newmont reduced production. production due to the sale of the Kalgoorlie projects at the beginning of the year, and the Red Lake project in April. “
In the first half of 2020, the price of transactions in the mining sector due to the pandemic fell by more than $ 18 billion compared to the same period a year earlier – to $ 46.6 billion.
“The expected downturn in the global economy kept investors from using long-term financial instruments, which led to a 12.7% yoy reduction in capital raised by mining companies,” says GlobalData.
Seven of the ten largest asset deals in the world involved gold. Topping the list was Mudrick Capital Acquisition Corp (MUDS), which acquired equity and assets from Hycroft Mining Corp for $ 537 million to create Hycroft Mining Holding Corp. The other three are cobalt, coal and copper.
Bajaj believes that the largest deal completed was the $ 3.79 billion acquisition of Detour Gold by Kirkland Lake Gold Ltd. By incorporating the Detour Lake mine into its production assets, the company intends to increase its gold production in 2020 to 1.5 million ounces. “Through this acquisition, Kirkland Lake also raised $ 173.9 million in cash and repaid Detour’s debt of approximately $ 98.6 million. In addition, due to its high liquidity, the company raised $ 1 million in a private placement primarily to complete the the second phase of the Hasbrouck development project in the United States, “the expert noted.
Other deals: PT Indonesia Asahan Aluminum raised $ 2.5 billion by offering three sets of bonds at 4.75%. Of the total, 60% will be used to pay off debts and purchase 20% of PT Vale Indonesia, and the remaining 40% will be used to refinance the company’s old bonds.
Freeport-McMoRan raised $ 1.3 billion to buy back some outstanding bonds due in 2021 and 2022.
“In the first half of 2020, the total number of transactions increased to 2,271 from 1,811 in the first half of 2019, mostly 79.7% were transactions to raise capital. The volume of completed M&A transactions increased by 28.4%, – in Canada, USA , Australia, China and India accounted for almost 87% of their total, and more than 72% of their total, “sums up Bajaj.
Gold Miner Bulletin