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The surging Australian dollar price of gold has triggered talk of a resurgence in the Victorian gold sector, but is it more than talk?
In recent months we have seen the emergence of $2 billion companies listed on the Australian Securities Exchange (ASX) anchored by Victorian gold operations. Investment in mineral exploration in Victoria has bottomed out around $100 million annually and looks set to improve, pushed along by gold bullion trading at record levels around A$5,800 per ounce.
While sectors of government and mining industry raise discussion about critical minerals, it’s gold that really fires the imagination of investors and speculators in this active sector of the sharemarket. Afterall, Victoria was the original Aussie Golden State and was the site of the big gold rushes from the 1850s and into the ensuing decades.
Victoria joins WA in golden resurgence
It is something Victoria has in common with Australia’s biggest gold producing state (Western Australia) that the current resurgence is based around old gold fields which were scenes of those first rushes. And it’s not just about digging a little deeper. New exploration techniques and a willingness to work with local communities is driving the resurgence in a state which still produces more than 200,000 ounces a year, from five major mining centres.
Victoria’s two billionaire companies are Southern Cross Gold Consolidated (ASX:SX2), with its Sunday Creek Gold and Antimony Project, and Alkane Resources (ASX:ALK), where the Costerfield Gold and Antimony Mine is the major asset in this three-mine portfolio formed by the recent merger of Canada-listed Mandalay Resources (TSX:MND) and NSW-focused Alkane.
Alkane is the 100% owner of Costerfield, located right in the heart of the central Victorian goldfields, producing around 50,000 ounces of gold equivalent a year. It also holds the title of the largest producer of antimony outside of China. Antimony is also having a price boom of sorts, with the metal caught up in current tariff wars between the US and China. Alkane also mines gold at Tomingly in NSW and the Björkdal Gold Mine in Sweden.
Southern Cross is a young company managed by Victorian mining entrepreneur and geologist Michael Hudson, focusing on a near-forgotten piece of mining history – the Sunday Creek gold field less than 90km north of the state capital of Melbourne. Michael and his team tried a fresh approach to drilling underneath and around old underground and surface workings on a hillside in this abandoned field.
In a short space of time, this C$1.7 billion ($1.8 billion) company has delivered some of the best gold drilling grades anywhere in the world, with a bonus of an antimony kicker in the results. As I write, Southern Cross is welcoming its 10th drill rig onto the Sunday Creek project and its regional exploration acreage.
Fosterville remains jewel in Agnico’s crown
While Alkane and Southern Cross are the new names on the sharemarket list, Victoria also plays host to the 170,000-ounce-a-year Fosterville Gold Mine, owned and operated by global gold major Agnico Eagle Mines (NYSE:AEM). While production rates have come down from frothy days of mining the fabulously rich Swan zone at Fosterville, the mine is still a high-grade and profitable standout in the Agnico portfolio and is the company’s only operating mine in Australia.
Southern Cross’s commercial success has also triggered fresh interest in Victoria from North American investors, as Southern Cross is also listed on the Canadian exchange and has many successful gold investors as prominent shareholders. Underground mines at Stawell in the state’s West and Ballarat are small in production but operating successfully under private ownership and are big cash generators at today’s gold prices.
Evocatively-named Kaiser Reef (ASX:KAU) has just put its A1 Gold Mine in Eastern Victoria on care and maintenance but is moving forward with work on another piece of Victoria’s rich mining history at Maldon in central Victoria. Kaiser also recently purchased the Henty Gold Mine in Tasmania and is the latest Victorian company to qualify as a sharemarket-listed producer.
Exploration investment may have halved from highs of recent years, but there are several Aussie and Canadian companies keeping the drill bit spinning.
Bendigo-based Falcon Metals (ASX:FAL) set hearts a flutter and its share price soaring after hitting bonanza gold grades while testing a theory that the historic Bendigo gold-bearing quartz reefs, which produced around 20 million ounces, might extend outside the accepted boundary … at depth.
Bendigo is the undisputed jewel in the crown of Victorian gold fields, but was largely abandoned last century as old mines were depleted and water levels rose in underground workings. A resurrection during a recent gold boom fizzled out, despite the discovery of a new gold reef below old workings that was successfully mined and processed.
Falcon – led by noted mine finder Mark Bennett, Managing Director Tim Markwell and locally-bred and educated geologist Doug Winzer (pictured) – poured over thousands of pages of old reports and maps and deduced that Bendigo’s grand quartz reef lateral systems did not die out but continued north at 500 metres and deeper.
This game trio, backed by local and West Australian investors, hit the targeted Golden Gully line of reef with their first diamond hole in the northern extension permit and then hit the jackpot with a sidetracked hole into a bigger reef section within metres of where the old maps hinted about the location. Additional holes are being planned further north along the Garden Gully and potentially into the rich New Chum line of reef to the west.
Drilling success creates billions in share value
At last count there were more than 15 TSX and ASX-listed companies with a focus on Victoria and billions of dollars of sharemarket value having been created by exploration success and the stunning rise in the price of gold.
The Victorian Government is also paying attention to the economic potential of a bigger mining sector, issuing permits for new mines, permitting mine infrastructure expansions at Costerfield, Stawell and Ballarat as well as declaring the state was “Open for Business” when it comes to well-credentialled companies with good ideas and good relations with local communities.
Victoria and its regional centres are facing many challenges these days and good citizens like Agnico Eagle and its 700+ workforce at Fosterville are the kind of job-creating opportunities that country towns are crying out for.
The search for the next Fosterville or Costerfield is certainly heating up, providing work for drilling companies such as Deepcore, Tightline and Star West Drilling and the large number of mining, engineering and earth science consultancies that are prevalent in the state, often based outside Melbourne.
Smaller exploration companies are leading the charge, with the hope of becoming the next Southern Cross or finding the next Fosterville. Canadian Golden Cross Resources (TSX-V:AUX) is exploring just to the north of Sunday Creek for antimony and gold, Aureka (ASX:AKA) is testing gold potential at St Arnaud, Ararat and with Catalyst Metals (ASX:CYL) north of Bendigo, just to name a couple.
Images: ABC Bullion, Doug Winzer, LinkedIn
