The world's 10 lowest-cost gold mines| S&P Global Market Intelligence

The World's 10 Lowest-Cost Gold Mines

By Oliver Wooland, September 9, 2020

The Fosterville mine in Australia became the lowest-cost gold mine in 2019 on an all-in sustaining cost, or AISC, coproduct basis, with Gross in Russia and Dong'an in China taking up second and third places, respectively. Fosterville's low cost was due to the mine's high grade, which enabled higher gold production while absolute costs remained steady. Looking ahead, we expect Fosterville to stay in the top three producers for the near term as it maintains production and grades.

Three very different operations had the lowest production costs in 2019. Costs at Kirkland Lake Gold Ltd.'s Fosterville decreased by nearly 70% from 2014 to 2019, with paid gold production increasing from 105,000 ounces per year to 618,000 oz/y over the period. The reason for the cost reduction was the completion of a mine expansion into the high-grade Lower Phoenix and Swan deposits, which increased head grade to 39.60 grams of gold per tonne of ore from 4.62 g/t Au in 2014. This also led to an overall increase in the 10 lowest-cost mines' average grade in 2019. The higher grades increased gold production by 73% year over year, while AISC in U.S. dollars increased by 10%, leading to a lower overall AISC in terms of U.S. dollars per ounce.

Nord Gold's Gross mine rose to second place with an AISC of US$443/oz, US$90/oz higher than Fosterville. It was the lowest-grade mine among the 10 lowest-cost mines for 2019 and below the global primary open pit average of 2.09 g/t Au. The open pit heap leach operation began production in 2018. This method generally has low operating costs due to minimal comminution and a simplified beneficiation process to extract gold from leachate. Although lower grades of 0.76 g/t were seen in 2019, compared with 1.01 g/t in 2018, the higher heap leach production, to 14 million tonnes per year from 12 Mt/y, increased gold production by 337% year over year, exceeding the mine's production guidance. Absolute costs in U.S. dollars only increased by 328%, which ensured AISC was lower in 2019 in U.S. dollars per ounce.

The Chinese mines Dong'an and Sanxin ranked third and fourth. Dong'an is a particularly high-grade open pit — with grades of 15.27 g/t rivaling underground operations — which enables higher gold production and low costs on a unit basis. Sanxin is an underground polymetallic mine that receives most of its revenue from gold, which came in at 38% in 2019. Although at 39,000 ounces it was the smallest gold producer among the 10 lowest-cost mines in 2019, it benefits from China's lower input costs and offset costs to copper and silver on a coproduct basis.

Looking ahead, we expect Fosterville to maintain its leading position through to 2022 due to continued high gold production and low costs. Exploration is a key factor in maintaining the high gold production as the mine relies on finding the high-grade gold veins within the deposit. As guidance has not been given for long-term exploration at the mine, we have not included it in forecasts; this in turn reduces future forecast AISC. Between 2020 and 2022, gold production is estimated to be 560,000 oz/y and is projected to drop by nearly 39% in 2023 due to falling grades, while AISC is expected to increase by only 10%. The stable cost forecast is due to continued investment by Kirkland Lake in the mine's infrastructure and equipment, such as a new paste backfill plant expansion being built this year. Once these projects are completed, we expect sustaining capital expenditure to decrease by 78% between 2022 and 2023. The mine has not been affected by the COVID-19 lockdowns in Victoria, with company guidance for 2020 production being maintained throughout.

Gross will have the largest cost increase among the 2019 top three, with AISC rising to US$645/oz in 2020 from US$443/oz. As the open pit is developed, Nordgold expects the costs to increase and reports AISC guidance of US$760/oz for the life of the mine. We ascribe the higher cost forecast to increasing mine depth, haulage distances and other costs associated with the growing pit footprint.

Malomir's AISC is more than doubling year over year in 2020, by 123%, and will continue to grow to US$1,503/oz by 2023. This is due to the completion of high-grade mining at the Malomir pit in 2020, where grades rose to 2.42 g/t in 2019 from 0.91 g/t in 2017. We expect the gold grade to drop to 0.94 g/t in 2020, which will lower gold production by 45% year over year as the mine develops its refractory ore reserves. The AISC increase is mostly caused by a 138% increase in material mined in 2020 to counter the depletion of the underground reserves in 2021. There is also an increase in total minesite and transportation costs in 2020, by 160% and 136%, respectively, caused by the mine transitioning from nonrefractory to refractory ore production, which increases reliance on pressure oxidation processing of gold concentrate off-site.

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