NZ economy

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Gold miners plan wind down as world prices drop

Big gold producers are making plans to wind down some operations in different parts of the country while keeping a close eye on the price of the precious metal, almost a third down on its highs this decade.

At Waihi a Newmont spokesman said the open pit in the centre of the town was on track for closure in March or April of next year. Photo / NZME.

NZ Herald,

19 January, 2015

In Waihi, Newmont Gold is on course to quit mining at its open pit early next year and the lifespan of its new underground mine beneath the town will be determined by gold prices which have fallen sharply during the past three years.

In the South Island NZX-listed Oceana Gold is winding down some West Coast and Otago production.

For the first time since 1998, gold posted back-to-back yearly declines by the end of 2014. Although it has edged up in the past fortnight, and was further boosted by turmoil from the Swiss franc move, the current price of US$1276 ($1638) an ounce is well down on its most recent high of just over US$1900 in 2011.

Craigs Investment Partners broker Peter McIntyre said any interest rate increases in the United States pushed up the value of the greenback, the currency would be an increasingly attractive haven for investors at the expense of gold. The metal was traditionally a hedge against inflation so deflation in some parts of the world was also negative for gold, he said.

Oceana's Macraes pit and underground mines were increasingly expensive relative to the company's new Didipio gold and copper mine in the Philippines. Oceana has during the past 18 months had to redesign its mine operations, shortened mine life expectations and laid off more than 250 New Zealand staff.

"They've indicated that Macraes is coming to an end - the final date hasn't been determined but it could be in the next two to three years," said McIntyre.

At Waihi a Newmont spokesman said the open pit in the centre of the town was on track for closure in March or April of next year but there would be "considerable" rehabilitation work around the top of the pit and the associated tailings dam that could stretch for five years.

The pit has been mined since 1987 and there have been several variations in the mining plan since then.

The new Correnso mine under the eastern part of the town is being dug and was on track for producing ore around the middle of this year.

Work on the spiral decline and tunnels was under way but the life of the mine would be determined by gold prices, he said.

"That one is very dependent on the gold price - if it stays where it is around $1200 that will be done in three years. If it was to start swing-ing up we know there is more we could profitably take," he said.

While the gold price was "occupying our thoughts for a considerable amount of time" it was the margin that was most important.

"You can't control the gold price but you can control the input price and when the gold price was really high everybody was charging top dollar for everything," he said.

The price of tyres, parts for machines, labour, diesel, chemicals and steel had all fallen since gold prices hit their peak.

The spokesman said the long-awaited recreational lake in the open pit after it had been closed would be further delayed until mining in Correnso had finished.

'While we're mining at Correnso we can't fill the open pit with water - we can't turn the pumps off."

About 350 staff and contractors were directly employed at Waihi.