Interview: Nick Holland
How can stakeholders collaborate to ensure the sustainability of operations in mature mines?
NICK HOLLAND: Globally, we believe that the industry has been undercapitalised for an extended period, particularly over the past two decades. It has underspent on exploration, as well as cut spending on sustaining and growing capital. For a long time the mining sector has been struggling to sort out its profitability and debt issues; now the question is at what price this has been accomplished. We are at a point where companies are tasking themselves with rebuilding their gold reserves as quickly as possible. In this context, big mergers are the easiest way out. In the old days mergers in mining were more about joining efforts and creating operational synergies between different players. Nowadays it is more about resetting the baseline and getting rid of problematic assets, keeping the more profitable ores, building reserves and ultimately catching up with the market.
The underlying challenge is how the international gold industry will maintain its current annual production levels, which currently sit at around 105m oz. Every year the sector must find at least 100m oz to maintain itself, and current exploration expenditures do not allow for this figure to be reached.
The world has not run out of gold, but we have not actually explored sufficiently to find it all. Locating it takes both time and money, and we have not done enough in this area. In the near future it is possible that we will see some supply flattening or even decline as the global gold industry undergoes consolidation. Either way it continues to be a fascinating time for the gold industry.
What potential is there for further discoveries of gold in under-explored mining belts?
HOLLAND: Generally speaking, it is possible to argue that beneath existing surface operations, there is significant potential at depth in most mining belts. It is usually believed that mining potential has been well explored below the surface, but I do not think it has. At such levels gold is often not easy to discover, and electromagnetic devices may not be able to find these deposits. Different techniques are necessary to find the metal, and drilling may have to be used instead. This is the case in a variety of mining destinations in Western Australia and Ghana, for example. Our impression is that companies in the sector should not search for and pursue new frontiers in countries that have thus far remained unexploited and are difficult to mine in. Instead, a wiser option would be to capitalise in countries where companies already have well-established footprints.
In which ways can artisanal and small-scale mining (ASM) be integrated into the formal industry?
HOLLAND: Research suggests that 10% of the world’s gold is mined by ASM miners, providing livelihoods for about 100m people. Such significant volumes seem to indicate that the situation is unlikely to change in the near future. Similarly, it is overly optimistic to believe that the burden of regulating and policing such practices should fall on mining companies. Low or non-existent health and safety standards as well as environmental practices in ASM segments will also remain unchanged in the near future. As the situation stands there is a tacit acceptance of the current climate, and that it will likely remain unchanged for some time. It is difficult for large mining companies to get involved. The bottom line is that there is no easy answer to this problem. ASM employs a significant number of people who will require other income if there is a complete crackdown on these illegal or illicit activities. It then becomes the task of the government to find them new places in the labour market. This is a burden for public authorities and one which they appear, to a large extent, unwilling to take on.