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David and Goliath – Rewritten.

Featured Image Source: https://www.cbc.ca/news/business/newmont-goldcorp-1.4977080

TMG’s Perspective On Mineral Reserves.

In the story of David and Goliath, it looks like Goliath is winning this time! As the giant players in the market just keep growing, the TMG team took an in-depth look into the future of gold reserve estimates and the goliath impact of mergers and acquisitions.

Recent M&As continue to affect the mining industry with a more realistic perspective on reserve estimates.

TMG collected Sedar filings and gathered market research, to analyze and compare recent gold production results and total reserves of seven (7) of the world’s top gold producers. Our initial task was to investigate which companies could potentially run out of gold. The analysis provides an interesting perspective when we compare actual production rates with potential mineral reserve estimates. It sheds a clear light on the need to optimize underperforming assets, as well as the need to continue developing new projects. The reality of the larger gold producing companies merging with or acquiring the smaller players, with large reserves, comes as no surprise when the data supports the need to reach maximum potential.

Estimated Reserves
Source: SEDAR reports https://sedar.com/search/search_form_pc_en.htm
Issue dates of the Technical Report – NI 43-101
Lundin Mining:
Chapada Mine, Brazil
Candelaria Copper Mining Complex, Chile
10-Oct-2019
28-Nov-2018
ElDorado Gold:
Kişladağ Gold Mine, Turkey
Olympias Mine, Greece
Efemçukuru Gold Mine, Turkey
Lamaque Project, Canada
17-Jan-2020
31-Dec-2019
31-Dec-2019
21-Mar-2018
New Gold:
New Afton Mine, Canada
Rainy River Mine, Canada
28-Feb-2020
12-Mar-2020
Yamana Gold:
El Peñón Gold-Silver Mine, Chile
Jacobina Gold Mine, Brazil
Canadian Malartic Mine, Canada
Minera Florida, Chile
31-Dec-2020 and 2-Mar-2018
31-Dec-2019 and 30-Sep-2019
31-Dec-2020
11-Feb-2021
Alamos Gold Inc:
Island Gold Mine, Canada 14-Jul-2020
Kinross Gold Corporation:
Paracatu Mine, Brazil
Tasiast Project, Mauritania
Fort Knox Mine, USA
Kupol Mine and Dvoinoye Mine, Russia
10-Mar-2020
31-Oct-2019
11-Jun-2018
31-Mar-2015
Centerra Gold:
Mount Milligan Mine, Canada
Öksüt Gold Project, Turkey
31-Dec-2019
3-Sep-2015

A return of M&A to the industry.

Acquiring companies with large reserves provides instant value and appeal. On paper, these newly merged companies increase their total reserves, in turn increasing Investor, Shareholder, and C-Suite interest and gains. Stocks are instantly made more attractive with a larger reserve estimate. Everyone looks at resources and reserves. Resources tell us that the company has done the analysis and there is a set amount of gold available; while reserves provide the economically feasible reality, essentially setting the true value of a company’s worth.

What makes the most economic sense? The answer in this case, is the bigger (the reserve) the better. It is important for companies to announce that the reserves are there, and it is easy to understand why the giants in the market who are capable of M&As are doing so. It provides confidence to everyone with a stake in the business. Financially, it is a WIN-WIN situation.

It has become consistently clear that in order for larger mining companies to maintain their mineral reserves, they will continue to merge with or acquire smaller companies. While this has already led, and will continue, to provide a huge pipeline of work, with the need for multiple mines producing gold, versus just one or two large assets, which are becoming exceedingly rare nowadays, it is also important for us to focus on the need for continual growth and exploration.

In a 2019 BNN Bloomberg interview, Gary Goldberg, CEO, Newmont Mining (Jan 2019), stated the value of acquisitions as they provide “the flexibility to look across both portfolios and sequence the projects in the right order, in terms of delivering the best value.” [Source]

Mark Bristow, CEO of Barrick in a 2019 BNN Bloomberg article, declared, that “the industry is heading for irrelevance unless there are major changes.” We have indeed seen major changes since then. [Source]

While the industry is seeing new, larger players succeed, we also realize that the days of larger mine sites are becoming fewer. The large companies that have the necessary capital to mine the sites, now need 6 to 7 multiple assets to provide significant results.

Agnico Eagle Mines’ recent acquisition includes Kirkland Lake Gold’s Macassa mine in Ontario. (Photo Credit: KLG)

M&As have provided a positive market response and have resulted in companies buying for exploration purposes. It is evident that the uptick in mergers and acquisitions in the mining industry makes sense for companies that have underperformed. A property may show promise, and provide a healthy reserve estimate, which then allows for the accumulation of a larger total reserve estimate – this creates instant appeal and value in the market. It is TMG’s perspective that we can expect this trend of more consolidation to continue as we move forward. Companies have combined platforms of mining assets and have made smart moves to adjust their portfolios.

But we also need to consider the harsh reality in mining is that, if you’re not committed to growth, you’re heading towards a stark end, with reserves being depleted every day that you are in production. It is essential that someone – either the junior or senior mining companies – replace the reserves through the development of studies and capital projects, so that the mining assets continue to be available for development and for acquisition. According to TMG President, Peter Woodhouse, “mergers and acquisitions do not add reserves to our industry, which is being depleted on a daily basis. Only new projects add actual reserves, and this is where the difficulty lies. While some of the major mining companies have pared down their internal greenfields exploration teams, we must highlight that exploration assets are essential to the continual growth of the mining industry.”

TTMG is passionate about providing tailored services for mining projects through collaborative goal-oriented teams, to deliver value-add opportunities and innovation, in partnership with our clients to meet their needs. We will always take an objective, consultative approach to each and every thoughtful insight and recommendation.

Your TMG Team

TMG provides a unique oversight service to mining company executives and project owners who are, or will be, engaged in growing or enhancing their enterprise through capital projects. Our collective years of expertise enable us to get things done faster – ultimately saving you precious time, and helping you honour your project budget. In an industry where timing is everything, bringing TMG in at the right stage of your investment to be the eyes and ears for the project is critical.

Let’s connect and discover how we can help you bring your projects in on time.