Golden Future: Appetite for Gold is Good News for Northwestern Ontario!

As the gold bull market roars, Randy Smallwood, Past Chair of the World Gold Council and President of Wheaton Precious Metals said, "this is an infectious time for the yellow metal (globally)! "

In 12 months, the gold price in US dollars has increased to rarefied air levels with a $1100/oz increase in price, taking gold to the $2800/oz range. This steady rise has been fueled by a combination of strong demand from retail investors in India and China, nervous central banks concerned about record global debts and a weakening US dollar, and excess global liquidity seeking safe harbour at a time of record stock market valuations, slowing growth, and persistent inflation.

Gold is prized by both retail investors and central banks for three main reasons:

•           It serves as a long term store of value and inflation hedge.

•           It can offer safe haven during a local currency or banking crisis.

•           It can help to diversify an investment portfolio during market volatility.

Specific to central bank trends, 30% of the world’s 70 central banks will purchase gold in 2024-25. Those central bank gold reserve managers purchase gold to mitigate currency exchange risk and prepare for political and economic uncertainty.

Despite record gold prices junior exploration companies are “not getting any love”. Equity performance has not matched the gold price. Juniors have to raise their exploration cash from the market because they don’t have revenue from production like the mid-tier or major company. The health of the junior sector is fundamental to making that next gold deposit discovery, as the term “junior explorer” defines high-risk, high-reward.

How does Ontario fit into this picture?

Chris Hodgson, Past President, Ontario Mining Association, sums up the gold scene in a clear message; “The most sought after metal in Ontario is gold, and gold is a critical element!”

Let’s focus on Northwestern Ontario and how gold helps to drive our economy and create wealth and solid careers. By next year (2025) forecast gold production in NWO will be at 1.4 million ounces (22% of Canada’s 6.33 M ounce total). Mines leading that charge in Northwestern Ontario include: Equinox Gold‘s Greenstone Mine (newest addition), New Gold’s Rainy River Mine, Newmont’s Musselwhite Mine, Alamos’ Island Gold Mine, Wesdome’s Eagle River Mine, Barrick’s Hemlo Mine, and Evolution’s Red Lake Mine. This production listing includes the world’s largest gold companies, in Barrick Gold and Newmont, and a healthy group of mid-tier producers.

The workforce at the mines is made up of 13% women and 12% indigenous peoples. All-in, mining is the highest paying industrial sector. In addition, each mine can be perceived as an economy unto itself. Vendor procurement lists for ongoing goods and services including: engineering, fabrication/mechanical, maintenance, critical spares, construction, food, fuel..., would amount to 800-1600 companies supporting that one mine!

By 2030, West Red Lake Gold Mines at the Madsen Mine and Kinross Gold at the Great Bear Mine (both in the Red Lake District) will come online, bringing NWO gold production to an astounding 2.01 million ounces annually. This will represent 22-25% of Canada’s projected 8-million-ounce annual gold production by 2030. 

One might ask, how do Northwestern Ontario’s larger gold mines fare nationally regarding annual production? The largest gold mine in NWO in 2024 is New Gold’s Rainy River Mine at a forecast of 250,000 ounces per year. BUT the new kid on the block, the Greenstone Mine owned by Equinox Gold, will have annual production at 400,000 ounces by 2025. Looking further ahead, Kinross Gold’s Great Bear Mine is forecast to produce 500,000 ounces annually by 2029. The largest gold producer in Canada is Agnico Eagle’s Detour Gold Mine at 700,000 annually.

Of particular note for our social democracy, the Ontario Mining Association estimates that 77% of the wealth generated from these mines stays in Ontario.

Todays and tomorrow’s mines shouldn’t be taken for granted. Exploration is the “R&D” of the mining business that is essential to maintain a pipeline of future producing mines. Four of 17 of Canada’s largest undeveloped gold reserves are located in Northwestern Ontario (Goldshore’s Moss Project, Kinross’s Great Bear Project, Agnico Eagle’s Hammond Reef Project and First Mining Gold’s Springpole Lake Project). Total contained gold (measured/indicated, inferred) in these four deposits is 24 million ounces. In addition to that total, and in the wings, are additional gold resources for 10 other maturing advanced exploration projects in NWO touching on 11 million ounces. The long-range future looks very bright for the “yellow metal”! 

Gold has a number of touchpoints in our lives because of its unique properties as a native element. As described earlier, gold is considered by many as the ultimate currency, a safe investment and a vehicle to preserve wealth, but as Chris Hodgson points out, gold plays “a significant role in enabling innovation, and is critical for modern technologies.” For example, gold is an essential component in conductors, electronics, appliances, smart phones, laptops and televisions. In medicine it has a strong place in revolutionizing diagnostic tools. In defense technology and aerospace, demand for gold is growing exponentially.

Aside from record gold production on the horizon for Northwestern Ontario, we can also look at what else is coming at us associated with this excitement! Those themes are:

Opportunities/Challenges (forecast)

• Lower grade gold deposits will be developed (sub gram/tonne gold deposits will be economic in some cases as open pit targets).
• More open pit mines will be built.
• Historic mine districts may see significant new exploration life.
• Mergers and acquisitions (M&A) will ramp up.
• Energy requirements (transmission and supply) will rise significantly, especially for open pit mine/mill complexes to meet crushing and grinding requirements.
• Workforce pressures will be enormous with expansions and new mines coming on-stream.
• Lakehead University and Confederation College will have research opportunities and be part of the workforce solution (as will unions).
• Indigenous partnership opportunities with gold companies will trend.
• Exploration and mine service and supply business growth will ensue.
• Opportunities regarding geophysical and geochemical applications specific to exploration will result.

In summary, over the short and long term, exploration investment will rise in geologically fertile and mine-proven jurisdictions like Northwestern Ontario. The role of the prospector and junior exploration company will be critical. The gold industry is a potential ongoing economic driver for indigenous communities and municipalities in Northwestern Ontario! We do have a golden future!

Thunder Bay is well positioned to benefit economically from the gold mining sector. Thunder Bay in a “hub and spoke” thematic, already has 1000 individuals directly employed in mining in NWO, and will now have the opportunity to provide more workforce solutions for gold mines/exploration with exciting career paths for its citizens. In addition, mine supply and service businesses located in Thunder Bay, which total approximately 400 businesses, will have the opportunity to expand their offerings (or create new businesses) to meet the needs of the new mines maturing to production! It cannot be overstated, the entire Mining Sequence (exploration to development to construction to production) is in play here; there are workforce, and mine service and supply requirements through that entire continuum!

 

 

To read the Northern Mining Report for 2024, click on this link for your 128 page digital copy. https://issuu.com/canadiantradex/docs/ml_fall_2024

Tags: Northern Ontario / Investment / Gold / All Articles