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What Could Drive Gold Miners’ Long-Term Production Growth

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Long-term production growth

After discretionary cuts on exploration and capital expenditure, gold miners (GDX)(JNUG) have started to refocus on production growth. We’ll discuss these initiatives in this part of our series.

Newmont Mining (NEM) started commercial production for the Tanami Expansion in August 2017. Previously, it had completed Merian and Long Canyon on time and within budget in 2016. Its next project, North Exodus, is also expected to complete in 2018. Newmont’s project pipeline is one of the best in the sector currently.

Goldcorp (GG) provided its latest exploration update along with its 3Q17 results. It registered growth of 26% year-over-year (or YoY) in its proved and probable reserves to total 53.5 million ounces. Successful conversion of resources at Century and the acquisition of reserves led to this increase. The company is expecting its reserves to grow to 60.0 million ounces by 2021 due to exploration success at many of its sites.

Upside potential

Barrick Gold (ABX) is expecting its four projects—the underground mine at Goldrush, the Cortez Deep South underground expansion, the third shaft at Turquoise Ridge, and the Lagunas Norte—to contribute more than 1 million ounces of annual gold production to the company starting in 2020.

The company plans to maintain volumes of at least 4.5 million ounces annually through 2021. Barrick Gold’s production growth is weaker than its peers. It is, however, focusing on value over volume.

Growth projects

Kinross Gold (KGC) has several projects in the pipeline, which could provide an upside to its volumes. In September 2017, Kinross approved Round Mountain Phase W and Tasiast Expansion Phase Two. During the 3Q17 earnings call, KGC’s management commented that the Phase One of Tasiast Expansion is progressing well and is on time and budget. Kinross’s new projects could successfully replace the production from maturing mines at lower costs, thus allaying investors’ concerns of slowing production growth.

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