Australian gold in 40-years: The need for greenfields exploration

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MinEx Consulting Strategic advice on mineral economics & exploration
Australian gold in 40 years:
The need for greenfields exploration
Richard Schodde (Report Author)
Managing Director, MinEx Consulting
Adjunct Professor, Centre for Exploration Targeting (CET), School of Earth Science (SES), UWA
John Sykes (Today’s Presenter)
Strategist, MinEx Consulting,
PhD Candidate, CET, SES, UWA & Sessional Lecturer, Business School, UWA
Orogenic Gold Workshop: From Philosophy to Exploration?
12th February 2019, Perth, WA
Image: Terrain near Tropicana gold mine, Western Australia (Independence Group)

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Critical Issue: The slow-burning story
By 2032 (i.e. in 15 years 13 years time), half of all Australia’s
gold production will come from deposits yet to be discovered
Of concern is the fact that the average delay between
discovery and development is 13 years
If we don’t act now, and support exploration today there is a
real risk of a significant supply disruption in the medium-term
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Image: Shutterstock

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1. OBJECTIVES OF THE REPORT
Australian gold in 40 years: The need for greenfields exploration
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Image: First gold bar from the Tropicana gold mine (Independence Group)

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• The 12 sponsors can be broken down into three groups
– State & Federal Geological Surveys (WA, SA, NSW, NT and GA) + Dept of
Industry, Innovation & Science
– Industry R&D Groups (CSIRO, CET and DET CRC)
– Industry Lobby Groups (AMEC, AIG and CME WA)
• Each group has its own interests & priorities
– The Surveys need hard data to build the business case on why Government
should support the mining & exploration industry … principally the revenues
and employment that flow from it;
– The R&D Groups need hard data to assess the economic and social payoff
from being “smarter” at exploration;
– The Lobby Groups want to raise public awareness on the critical issue that
exploration and mine development are both slow-burn stories. By the time
you realise that production is falling, it may be too late to fix it!
The report provides ‘hard data’ on the future of
exploration for a range of stakeholders
4
Long-term issues often
require collaboration to
resolve…

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The report is not an advocacy document
… it doesn’t identify or promote possible
solutions
Instead the report attempts to provide fact-based evidence on the
likely long term trends for the Australian Mining & Exploration
sectors.
... and from this, stimulate informed discussions with the key
stakeholders which will lead to robust policies to address the key
long term challenges facing the industry.
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However, I will discuss some potential
internal and external solutions (e.g.
management, technology, public policy, etc.,)
at the end of this presentation.

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Where can I get hold of the report?
Richard (and myself) would like to thank Robbie Rowe
for coming up with the study concept, raising the
necessary funds from the 12 sponsors, and tireless
energy in pushing Richard to complete the work!
Similar reports on Australia’s other key commodities (base metals,
uranium, coal and iron ore) will be progressively released over the
next few months
A copy of this presentation will be
made available on the MinEx
website in due course
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A copy of the report is available in the
workshop materials (and can be
downloaded from the MinEx website)
Other similar presentations can also be downloaded for
FREE on the MinEx website:
www.minexconsulting.com/publications

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2. THE PERILS OF FORECASTING
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Image: Shutterstock

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$0
$500
$1,000
$1,500
$2,000
$2,500
Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1 2017 Q1 2019 Q1 2021 Q1 2023 Q1 2025
Gold Price: Forecast vs Actual
Actual
Forecast
Gold analysts have a
mediocre price forecasting record
2017 US$/oz
Source: Consensus Economics, various years
8
Under-forecasting on
the way up…
…and over-forecasting
on the way down!
This is the problem with
using ‘reversion-to-mean’
forecasting over the short-
term (instead of the long-
term)*
* In general, over the short-term, you’re usually better off extrapolating the trend, i.e. prices
will continue going up, or prices will continue going down – that is, of course, until they do not!

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Experts predict a looming shortage in copper
supply…
Source: Wood Mackenzie Q1 2017 as reported by Amerigo Resources Nov 2017
9

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… but they always do!
Source: Wood Mackenzie Dec 2011
Same forecast, but
6 years earlier!
10

11
For disclosure, I have been known to be
involved in incorrect forecasts too
Forecasts I was involved in – same
pattern of over and under forecasting
TBF, it was
the GFC!

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…many times…!
Making things more ‘sophisticated’
with scenarios didn’t necessarily help!

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Forecasting is a fraught activity…
“Scythia has an abundance
of soothsayers who foretell
the future. They are judged
by results and the losers are
loaded on to oxcarts which
are set on fire.”
- Herodotus, Histories (440BC)
NB: This is a paraphrasing of the original text by former CRU colleague, Jon
Tomlinson.
Image: Karen B. Jones / Shutterstock.com

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…but we can’t just give up!
“My interest is in the
future because I am
going to spend the
rest of my life there.”
- Charles “Boss” Kettering
(American engineer & inventor, 1876-1958)
Image: Time magazine cover 9 January 1933. Title: "Charles Franklin Kettering".

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• Often are single-line forecasts (no uncertainty !);
• Mainly focused on existing mines and known projects with a
high-likelihood of development;
• Use arbitrary rules of thumb on likelihood of “Probable”,
“Possible” and “Speculative” projects being developed;
• No adjustment for effect of changes of commodity prices on
head grades / mine life / likelihood of mine development;
• No allowance made for growing the resource;
• No allowance made for exploration success!
The key issues with existing supply forecasts
These simplifications are OK if you are looking 5-10 years
out ... but not so if you are doing a 40 year forecast !
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3. METHODOLOGY
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Image: Core samples from the Super Pit, Kalgoorlie (KCGM)

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• Model likely production from 3 sources:
– Existing mines
– Possible new projects (based on known resources)
– Exploration success (based on ‘unknown’ resources)
• Future production will be influenced by the gold price
– Higher prices will encourage (marginal) new production to come online
– Lower prices will cause mines to increase their cut-off grade (so as to survive)
… but this severely impacts on the size of the remaining available resources
– Exploration spend (and the rate of discovery) is strongly influenced by
commodity prices
• Embrace uncertainty
– Run 1000 different price scenarios
– Incorporate uncertainty into exploration success and timing of new projects
This study seeks to correct many of the supply-
side forecasting problems
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We can predict rates and
volumes of metal discovery, but
alas, not where they will be
made – or who will make them!

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1. Build a production & cost model for each mine
2. Forecast the future gold price. And with this …
3. Based on cash costs (supplied by CRU) estimate whether the mine is
profitable. If not …
4. Adjust the head grade / cut-off grade to make the mine survive. If not,
put mine on care & maintenance until prices rise
5. Based on the new cut-off grade, and mine depletion estimate the likely
remaining reserves
6. Add in fresh resources associated with mine-site exploration success
(this is a function of the age of the mine)
7. Based on the new head grade, calculate likely metal production (koz pa)
8. Adjust numbers for uncertainty in output (i.e supply disruptions)
First step: Forecast future production from
existing gold mines
18

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Use the same methodology as existing mines, but with the additional factor
that …
1. Based on the unit capital and operating costs, estimate the gold price
required to trigger mine development
- Development only occurs if the gold price exceeds the trigger price for 3 years
- Development may be delayed by the current status of the project
(it takes time to complete a Feasibility Study)
Second step: Forecast future production from
known gold projects
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2. Forecast the likely level of exploration spend ($m)
3. Predict the likely average unit discovery cost ($/oz)
4. Estimate the average amount of gold discovered per year (Moz pa)
5. Use historical size-frequency curve to predict the size and number of
discoveries per year (i.e. lots of small deposits, and the occasional giant)
6. Using historical data model the likely range in grade for each discovery
(i.e. most will be low grade, some will be high grade)
7. Based on size and grade, model the likelihood that the deposit will be
developed and, if so, estimate the likely in time delay involved between
discovery & production
8. Based on the size of the deposit, and the likely mining method used
(open pit, underground or mixed) predict the likely mining rate, gold
output (koz pa) and mine life
Final step: Forecast future production
from undiscovered deposits
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4: THE FUTURE GOLD PRICE
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Image: Shutterstock

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Assumptions used to generate the gold price forecast
• As a starting point, used the industry’s forecasts as a “base line”;
– But these generally only go out 5 years – so extrapolated out to 40 years;
– For convenience have used the forecast provided by the Office of the Chief Economist
(from the Australian Federal Department of Industry);
• Assume that business cycles will continue to occur in the future;
– Future price volatility will match that seen in the past;
– Short term prices will revert to the “mean” over the longer term;
• Assume that commodity prices are linked to each other;
– Metal prices tend to move in unison – but there is some variability;
– Have assumed that the historical level of “covariance” remains the same into the
future;
• To handle uncertainty, have modelled 1000 random price scenarios;
– Modelling done using @RISK software in Excel;
– The results have the same general “pattern” as historical price cycles.
First, forecast the future gold price…
22

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$0
$1,000
$2,000
$3,000
1985 1995 2005 2015 2025 2035 2045 2055
$1629
in 2017
$1781
$1471
$702
$1524/oz
Forecast
2017 A$/oz
$793 (-90%)
$2258/oz (+90%)
$1082 (-68%)
$1968/oz (+68%)
…and with this …
Sources: Historical data from LME; 2017-2022 forecast from the Office of the Chief Economist March 2017; 2017-2057 forecast from MinEx Consulting © February 2019
68% & 90%
Confidence
Intervals for 1000
scenarios
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Forecast price paths have the
same ranges and “pattern”
as that seen in the past
Just 3 (of 1000)
scenarios shown
(as examples)

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5. FUTURE PRODUCTION FROM
EXISTING MINES
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Image: Gwalia gold mine, Leonora, Western Australia (St. Barbara)

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71 operating gold mines were modelled
Existing Mines
N = 71
Bubble-size refers to gold production
in 2016, or first full year of
production (for mine re-starts)
1000 koz
500
250
100
25
Source: MinEx Consulting © February 2019
Operating gold mines (primary and by-product) in Australia, 2017

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…including the fact that resources
do grow over time
Years after mine start up
Average
Upper Range
Lower Range
165%
224%
90%
Grasberg, ID
Paracatu, BR
Pajingo, QLD
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Ratio of Current Pre-Mined Resource Ounces versus Reported Ounces at mine start up
NB: Analysis based on 27 gold deposits >1 Moz found and developed in the World since 1975. Resource figures have been adjusted for changes
over time in the cut-off grade. Pre-Mined Resource = Current Resource + Cumulative Historic Production (adjusted for processing losses).

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…and resources are a function of gold prices
via grade-tonne variations
Orogenic
Epithermal
Porphyry
2
3
4
1
0.1 0.2 0.3 0.4 0.5 0.6 0.8 1.0
Normalised Grade g/t (log scale)
Normalised Ore Tonnes (log scale)
Trendlines
Orogenic
Epithermal
Porphyry
Orogenic deposits
are more amenable
to high-grading
RULE OF THUMB: Doubling the
head-grade reduces the ore
tonnes by a factor of 4x and
contained ounces by 2x
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NB: Analysis based on 60 gold deposits from around the world that are >0.1 Moz. Tonnes & Grade for each deposit have been normalised to 1.
Grade-tonne relationship for gold mines

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0
2
4
6
8
10
12
14
2015 2025 2035 2045 2055
Actual
Current Reserves only (Mean)
Current Resources only (Mean)
Current Resources + Mine Site Discoveries (Mean)
Otherwise limiting the forecast to just P&P
Reserves exaggerates the decline in production
Moz pa
In terms of current Reserves, production from
existing mines will halve by 2022. Including
current Resources extends this to 2025 and
adding in potential mine site discoveries could
increase this by a further 2 years to 2027.
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Ratio of Current Pre-Mined Resource Ounces versus Reported Ounces at mine start up
NB: Not all of the reported Resource is mineable. The analysis includes assumptions about the likely amount converted from Resources into Reserves.
Forecast >

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0
20
40
60
80
100
2015 2025 2035 2045 2055
Finally, create a forecast of the number of gold
mines operating over the next 40 years
71 Mines
in 2017
31
43 Mines
in 2025
15 Mines
in 2035
7 Mines
in 2045 4 Mines
in 2057
Forecast is based on current known
MI&I Resources + resource growth from
mine site exploration
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Forecast number of existing gold mines, Australia: 2015-2057
NB: Analysis limited to mines producing >10 koz pa Au. The increase in number of mines between 2017-18 is due to commissioning of mines currently under
construction. Analysis assumes additional resources are found at existing operations – which extends the mine’s life.
Forecast >

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0
2
4
6
8
10
12
14
2015 2025 2035 2045 2055
Actual Forecast [Current Resources + Mine Site Discoveries]
Then, create a forecast of the gold production
from these mines over the next 40 years
Moz pa
9.70 Moz
in 2016 6.89 Moz
in 2025
1.65 Moz
in 2035
0.35 Moz
in 2057
0.74 Moz
in 2045
10.10 Moz
in 2020
The range of output is driven by
the uncertainty of the gold price
(and the potential need to
high-grade the deposit)
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Forecast gold production from existing mines, Australia: 2015-2057

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6: FUTURE PRODUCTION FROM
KNOWN PROJECTS
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Image: Mt Henry gold project, Western Australia (WestGold Resources)

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64 known gold projects were modelled
Note: Bubble-size refers to gold production in the
first full year of operation
New Projects
1000 koz
500
250
100
32
N = 64
Known gold projects in Australia, 2017 (primary and by-product – and including recently operating
mines now on care and maintenance)

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0
20
40
60
80
100
2015 2025 2035 2045 2055
…however, it is likely that few
will make it into production…
31
16 Mines
in 2025 12 Mines
in 2035
7 Mines
in 2045 4 Mines
in 2057
Note: same scale as that
for ‘operating mines’…
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…very few of the available projects will be
developed, because many are ‘marginal’
and thus require a sustained strong gold
price to trigger development
Forecast number of gold mines developed from known projects, Australia: 2015-2057
NB: Analysis is based on projects currently at the prefeasibility and feasibility stage, plus mines presently under care & maintenance. Source: MinEx Consulting © February 2019

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…because, “Once a dog – always a dog!”
Commodity Price
Production Cost
Price, Cost $
Time →
negative
return
negative
return
positive
return
Normal Business Cycle
[Project is sub-economic]
Early Boom
[Project is economic]
Late Boom
[Marginal]
Crash
[Project is un-economic]
Normal Business Cycle
[Project is sub-economic]
Marginal projects are
only economic for a
short window of time
34
Source: McCuaig, March 2009
CAUTION: Cartoon only – not real data!
“Once a Dog – always a Dog”
Cam McCuaig

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0
2
4
6
8
10
12
14
2015 2025 2035 2045 2055
New Projects + Mines under C&M
…meaning, existing known gold projects will
contribute little production over the long term
Moz pa
After adjusting for the likelihood of development
and factoring in startup delays, likely production
from new projects will peak in 2027 (NB: see
exploration section for methodology)
1.31 Moz
in 2025 1.18 Moz
in 2035
0.29 Moz
in 2057
0.65 Moz
in 2045
0.81 Moz
in 2020
35
NB: Analysis is based on projects currently at the prefeasibility and feasibility stage, plus mines presently under care & maintenance. Source: MinEx Consulting © February 2019
Forecast production from known gold projects, Australia: 2015-2057

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7. FUTURE PRODUCTION FROM
UNDISCOVERED DEPOSITS
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Image: Exploration near Tropicana gold mine (Independence Group)

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7A. FUTURE EXPLORATION
EXPENDITURE
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Image: realestate.com.au

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Where are we in the process?
38

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Forecast exploration spend, as exploration
spend varies with US$ gold price…
Gold price and exploration expenditures – World: 1975-2016
$0
$2
$4
$6
$8
$10
$12
$0
$500
$1,000
$1,500
$2,000
1975 1985 1995 2005 2015
2017 US$/oz Au 2017 US$ Billion
$0
$2
$4
$6
$8
$10
$12
$0 $500 $1,000 $1,500 $2,000
2017 US$ Billion
2017 US$/oz Au
Year
2016
Exploration
Spend
1985-
2016
NB: There are similar
correlations for other
commodities
1985
R2 = 0.81
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WORLD
Gold Price

40
…but interestingly not with the A$ gold price
Gold price and exploration expenditures - Australia : 1975-2017
$0
$500
$1,000
$1,500
$2,000
$0
$500
$1,000
$1,500
$2,000
$2,500
1975 1985 1995 2005 2015
2017 A$/oz Au 2017 A$ Million
$0
$500
$1,000
$1,500
$2,000
$0 $500 $1,000 $1,500 $2,000
2017 A$ Million
2017 A$/oz Au
2016
Gold Price
Exploration
Spend
1985-2016
1985
No correlation!!! R2 = 0.09
40
AUSTRALIA

41
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
1975 1985 1995 2005 2015 2025 2035 2045 2055
Forecast (Mean)
Actual
Predicted
Next test the predictive power of the
correlation against historic data…
2017 A$ Million
Forecast >
$694m in 2021
$1224m
41
Predicted versus actual Australian gold exploration expenditure: 1975-2017
Whilst not perfect… this
is usable for forecasting
Using alternate input
variables, and a shortened
time frame improved the
R2 from 0.07 to 0.70
$647m
in 2017
$396m
NB: The predicted spend is based on multi-variate analysis including gold price, years delay, and year-on-year price volatility. The model ignores data prior
to 1995 as the industry was in an ‘emergent phase’ (i.e. a step change in prices, technology and innovation, and the introduction of the gold tax in 1991).

42
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
1975 1985 1995 2005 2015 2025 2035 2045 2055
Forecast (Mean)
Actual
Predicted
Now make the forecast of future Australian
gold expenditure…
2017 A$ Million
$475m (-90%)
$882m (+90%)
$677m Forecast
Forecast >
$550m (-68%)
$805m (+68%)
$396m
$694m in 2021
$1224m
$647m
in 2017
68% & 90%
Confidence
Intervals
42
Forecast Australian gold exploration expenditure: 1995-2057
Based on 1000
scenarios

43
7B. FUTURE EXPLORATION SUCCESS
43

44
Where are we now?
44

45
$0
$50
$100
$150
$200
1975 1980 1985 1990 1995 2000 2005 2010 2015
First, predict the average unit discovery cost
Average Discovery Cost, Australia: 1975-2016 (2017 A$/oz Au)
5 Year rolling average
Going forward assume
A$70/oz and rising by
A$10/oz per decade (~14%)
45
NB: Discovery costs are based on a 5 Year Rolling Average. 2007-2016 data includes adjustment for likely resource growth & unreported discoveries.
Est.

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0
10
20
30
40
50
1995 2005 2015 2025 2035 2045 2055
Forecast (Mean)
Unreported (Est)
Actual
Next, estimate the average amount of gold
discovered per year…
Moz
6.3 Moz
Forecast
Forecast >
16.1 Moz
0.6 Moz
9.5 Moz
in 2021
46
Forecast Amount of Gold Found, Gold deposits >100 koz Australia: 1995-2057 (2017 A$/oz Au)
NB: The large figure of 48.7 Moz for 1996 is due to the discovery of Cadia East (37.6 Moz)

47
0
5
10
15
20
1995 2005 2015 2025 2035 2045 2055
Forecast (Mean)
Unreported (Est)
Actual
…and how many deposits the gold
is contained within
Number
5.0
Forecast
Forecast >
7.6
in 2021
2.0
9.0
47
Forecast Number of Deposits Found, Gold deposits >100 koz Australia: 1995-2057

48
Then use a size-frequency curve to predict the
size & number of discoveries per year
1
10
100
1000
10000
0.01 0.1 1 10 100
Known discoveries
Best Fit
Cumulative size-frequency for gold deposits (Total Australian primary gold deposits found since 1975)
Endowment, i.e. Current Resource + Historic Production (Moz Au)
i.e. In the last 40 years, for every one deposit found in
Australia that is > 10 Moz, one also finds 12 deposits >1
Moz, 41 deposits >0.1 Moz and 100 deposits >0.01 Moz…
87 > 1 Moz
7 >10 Moz
290 > 0.1 Moz
700 > 0.01 Moz
48
Caution: Chart excludes value of by-product credits (such as copper and silver )

49
Then use a size-frequency curve to predict the
size & number of discoveries per year
0%
20%
40%
60%
80%
100%
0.1 1 10
0.1 to 0.5 Moz
0.5 to 1 Moz
1 to 2 Moz
2 to 5 Moz
>5 Moz
Trend Line
2 3 4 5
Ore Grade (g/t Au)
Smaller deposits tend
to have higher grades
49
Cumulative frequency: Grade of gold deposits by size (Primary Gold Deposits found in Australia: 1975-2015)

50
7C. CONVERSION OF EXPLORATION
SUCCESS INTO MINES
50
Image: Early digging at Gruyere gold mine (Gold Road Resources)

51
developed and, if so, estimate the likely in time delay involved
between discovery & production
Where are we now?
51

52
First, assess the likelihood that the deposit will
be developed based on size and grade
0%
20%
40%
60%
80%
100%
0 10 20 30 40 50
Years from Discovery
1980-89
1990-99
2000-16
Forecast
Cumulative %
50%
A: Number of Deposits
0%
20%
40%
60%
80%
100%
0 10 20 30 40 50
Years from Discovery
1980-89
1990-99
2000-16
Forecast
Discovery Period
Cumulative %
85%
B: Total Metal
The overall conversion
rate is getting lower
and slower
79%
50%
88%
61%
22%
48%
52
Cumulative Number of Discoveries (and their contained metal) that become mines
(All Primary Gold Discoveries (>100 koz) in Australia found since 1980)
Bigger (and better?)
deposits are more
likely to be developed

53
First, assess the likelihood that the deposit will
be developed based on size and grade
0%
25%
50%
75%
100%
0.1
to
0.2
0.2
to
0.3
0.3
to
0.4
0.4
to
0.5
0.5
to
0.8
0.8
to
1.0
1
to
1.5
1.5
to
2
2
to
3
3
to
5
5
to
10
>10
Likelihood of Development
27%
38% 38%
47%
52%
62%
71% 68%
75% 76%
82%
100%
On a weighted average basis, the
overall likelihood of a discovery
being developed is 50%
Deposit Size (Moz)
53
NB: Estimate that 76% of contained
gold will be recovered
NB: Envelopes refer to the Confidence Intervals of 68% and 90% respectively for 1000 simulations.

54
Then estimate the likely in time delay involved
between discovery and production…
0%
20%
40%
60%
80%
100%
0 2 4 6 8 10 12 14 16 18 20
<1 g/t Au
1-2 g/t Au
>2 g/t Au
Years Delay
Cumulative Probability of Development
Lower grade deposits tend
to have longer delays
between discovery and
development
Low Grade
High Grade
Medium Grade
54
Delay Curve: Open Pit Gold Projects (For deposits discovered and developed in Australia: 1975-2014)
NB: Analysis excludes discoveries that have not yet been developed into mines

55
-20
0
20
40
60
80
2015 2025 2035 2045 2055
New Discoveries in Year (Mean) New Mines Opened in Year (Mean)
Mines Closed Down in Year (Mean) Total No of Operating Mines (Mean)
… and forecast the number of future gold mines
due to exploration success
Forecast total
number of
operating mines
3
5.0 new discoveries
3.7 new mines opened
4.1 mines closed
21 mines
in 2025
40 mines
in 2035
43 mines
in 2045
39 Mines
in 2057
Annual
change
Net
cumulative
change
55
Forecast number of gold mines associated with exploration success in Australia: 2015-2057

56
10
21
32
27
35
42
70
64
0
20
40
60
80
100
1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09 2010-14
Note that discoveries are getting deeper…
Discovery Year
Depth of Cover (Metres)
Going forward assume that the
average depth of cover is rising
by 10 metres per decade
56
NB: Analysis based on data for 186 primary gold deposits >0.1 Moz found in Australia since 1975
Average Depth of cover for primary gold deposits found in Australia: 1975-2015

57
0%
20%
40%
60%
80%
100%
1975 1985 1995 2005 2015 2025 2035 2045 2055
…meaning more underground mines and
slower rates of production…
Percentage
Open Pit
Mixed
50%
30%
20%
Forecast >
Underground
Forecast that Australia
will go underground…
57
Likely mining method for gold projects: Australia primary gold deposits >100 koz : 1975-2055
NB: Percentage figures are based on the number of projects. Historical data has been smoothed using a 5 year rolling average.
…and underground
mines have a slower
production rate

58
0
2
4
6
8
10
12
14
2015 2025 2035 2045 2055
Production from Mines associated with New Discoveries
Finally, resulting in a forecast of gold
production from new discoveries
Moz pa
1.71 Moz
in 2025
3.82 Moz
in 2035
4.06 Moz
in 2057
4.32 Moz
in 2045
0.35 Moz
in 2020
Forecast >
58
Forecast gold production from new discoveries, Australia: 2015-2057
NB: Refers to expected discoveries >0.1 Moz made post-2017. Includes adjustments for the likelihood of development and time delay for mine start up.

59
8. COMBINED RESULTS
59
Image: Ball mill at Gruyere gold mine (Gold Road Resources)

60
0
20
40
60
80
100
120
1995 2005 2015 2025 2035 2045 2055
The number of operating gold mines in
Australia is forecast to peak around 2021
Forecast >
47 Forecast
71
55
90 in
2021
67 Mines
in 2035
57 Mines
in 2045
29
69
35
59
NUMBER OF MINES
60
Actual and forecast number of operating gold mines, Australia: 1995-2057
NB: For mines >10 Koz pa Au
68% & 90%
Confidence
Intervals

61
0
2
4
6
8
10
12
14
1995 2005 2015 2025 2035 2045 2055
PRODUCTION
Gold production is forecast to fall off sharply
after 2025 (maybe earlier?)
Moz pa
Forecast >
4.69 Moz
Forecast
9.70 Moz
in 2017
11.34 in
2021
10.17
6.88
6.65 Moz
in 2035
5.70 Moz
in 2045
2.96
6.62
3.55
5.84
61
Actual and forecast gold mine production, Australia: 1995-2057
NB: Analysis assumes additional resources are found at existing mines and projects currently under feasibility study
68% & 90%
Confidence
Intervals
Some uncertainty around ‘the peak’ due to scale of further
resource discovery at existing mines & projects

62
$0
$5
$10
$15
$20
$25
2005 2015 2025 2035 2045 2055
…with a consequent impact in revenues
from gold mining
2017 A$ Billion
Forecast >
$6.4 B
$16.6 B
$7.3B
Forecast
$17.8B
in 2020
$10.4B
in 2035
$14.7B
in 2025
$8.8B
in 2045
REVENUE
$2.80
$12.74
$4.27
$10.28
62
Actual and forecast revenues from gold mining, Australia: 1995-2057
68% & 90%
Confidence
Intervals

63
0
10,000
20,000
30,000
40,000
1995 2005 2015 2025 2035 2045 2055
…falling production combined with automation
forecast to severely reduce mine employment
Forecast >
8,300
Forecast
30,080
18,880
27,980
32,100
14,000
in 2035
26,500
in 2025
10,700
in 2045
3,100
14,300
4,900
11,700
NUMBER OF WORKERS
NOTE: Half of the decline
in employment is due to
automation
63
Actual and forecast number of gold mine workers, Australia: 1995-2057
NB: Excludes greenfield exploration and construction workers. Impacts due to automation based on
typical 0.5% pa increases in ‘worker productivity’ (arising from innovations such as automation).
68% & 90%
Confidence
Intervals

64
0
2
4
6
8
10
12
14
1995 2005 2015 2025 2035 2045 2055
Exploration Success
New Projects
Existing Mines
Historical
The gold industry looks set to be reliant on new
discoveries – just to decline less quickly!
Moz pa
Forecast >
4.1 Moz
9.7 Moz
in 2017
10.2 Moz
in 1998
6.9 Moz
in 2008
0.3 Moz
0.4 Moz
4.7 Moz
in 2057
11.3 Moz
in 2021
By 2032, half of all production will
come from deposits yet to be
discovered
64
Actual and forecast sources of gold production, Australia: 1995-2057
NB: Mean/Average forecast only. Due to uncertainty in commodity prices and exploration
success the likely forecast figure (at a 90% Confidence Interval) will vary by +/-40%.

65
9. THE IMPACT OF RESOURCE
QUALITY ON MINE PRODUCTION
65
Image: Ore from the Fimiston pit, Super Pit, Kalgoorlie (KCGM)

66
0
2
4
6
8
10
12
14
1995 2005 2015 2025 2035 2045 2055
Existing Mines
New Projects
Exploration Success
Actual
Forecast Total
Breaking the forecast down shows the future
industry’s reliance on new discoveries
Moz pa
Production from
Existing Mines
Forecast >
TOTAL
4.69 Moz
Forecast
Production from
New Discoveries
Production from Projects with known Resources
and Existing Mines currently under Care & Maintenance
4.06 Moz
9.70 Moz
in 2017
10.17
6.88
0.29 Moz
0.35 Moz
68% & 90%
Confidence
Intervals
66
Actual and forecast sources of gold production, Australia: 1995-2057
NB: Analysis assumes additional resources are found at existing mines and projects currently under feasibility study

67
0
2000
4000
6000
8000
10000
12000
14000
1995 2005 2015 2025 2035 2045 2055
EDR (Economic)
Resource (estimated)
Production - Historic (x10)
Production - Forecast (x10)
However, resource levels are forecast to remain
consistent, despite the production decline….
Tonnes
9,670 t
Forecast
Resource
Forecast >
Economic
Demonstrated
Resources
Mine Production
(x10)
9,909 t
68% & 90%
Confidence
Intervals
350 t
146 t
11,860 t
The effective resource life is set
to increase from 35 to 66 years…
67
Actual and forecast gold production and resources, Australia: 1995-2057
Source: MinEx Consulting © February 2019; EDR data from Geoscience Australia
Caution: Forecast Resources are estimates are not fully comparable with the historical reported EDR.
…due to increased numbers of
stranded-projects (or ‘dead-wood’)
and the move to underground mining

68
0
1
2
3
4
5
6
1995 2005 2015 2025 2035 2045 2055
Existing Mines
New Projects
Exploration Success
Actual
Forecast Total
…not helped by poor grades at known projects
and forecast grade decline at existing mines
g/t Au
Head grade of existing mines (essentially a
statistical anomaly at this stage)
Forecast >
2.19 g/t
Forecast
Average
Head grade of mines associated
with new discoveries
Head grade of new mines from projects with known resources
and existing mines currently on care and maintenance
68% & 90%
Confidence
Intervals
2.26 g/t
1.83
2.44
1.08 g/t
5.32 g/t
68
NB: Excludes mines where gold is produced as a by-product.
Actual and forecast gold production and resources, Australia: 1995-2057

69
10. HOW DO WE SLOW THE
DECLINE IN GOLD PRODUCTION?
69

70
-1.0
-0.5
0.0
0.5
1.0
1.5
2015 2025 2035 2045 2055
plus 10% over Base Case
plus 5% over Base Case
minus 5% over Base Case
minus 10% over Base Case
Higher gold prices provide only temporary
relief, whilst lower prices cause big problems
Moz pa
Higher gold prices encourage greater production over the short-
to-medium term (after a temporary dip due to the arrival on
stream of lower quality deposits, plus a reduction in head
grades at existing operations, over the very short term), but over
the long-term the effect diminishes substantially
70
Modelled impact of change in gold price on gold mine production, Australia: 2017-2057
NB: Base Case assumes a starting gold price of A$1629/oz in 2017.
Lower gold prices lead to ‘high-grading’ and a very
short-term boost in production, but overall it is to the
detriment of resource life and long term production.
Similar effects are seen for numbers of operating
mines, revenues, and numbers of workers

71
Spending more on exploration makes a big
difference!
$0
$200
$400
$600
$800
2015 2025 2035 2045 2055
Spend an extra $100m
per annum for 10 years
(from 2018-2027)
Incremental revenues generated
from additional gold deposits
found and developed
Spending an additional $100 M pa on exploration over
a decade (ie $1 Billion in total) will generate an extra
$11.4 Billion in revenues in subsequent years
2017 A$ Million
$613 M
in 2031
71
Modelled incremental change in revenues from spending an extra A$1 billion
on gold exploration in Australia: 2015-2057
…but where will this
money come from?

72
-0.5
0.0
0.5
1.0
1.5
2015 2025 2035 2045 2055
1 Year Slower
1 Year Faster
2 years Faster
However, speeding up exploration just brings
the eventual problem forward
Moz pa
Speeding up the exploration process (by either
policy intervention or by industry innovation)
by one year will result in a 0.2-0.3 Moz pa
increase in Australia’s mine production in the
medium term
72
Impact of change in speed of discovery – modelled incremental
change in gold production in Australia: 2017-2057
NB: Base case assumes a unit discovery cost of A$70/oz rising by $10/oz per decade.
…we just run towards the
edge of the cliff faster!

73
-1.0
-0.5
0.0
0.5
1.0
1.5
2015 2025 2035 2045 2055
+$20/oz
+$10/oz
-$10/oz
-$20/oz
Ultimately, we just have to get better at
exploration!
Moz pa
Improving unit discovery
costs by A$10/oz will result
in a 0.5 Moz pa increase in
Australia’s mine production
in the longer term
73
Impact of change in discovery efficiency – modelled incremental
change in gold production in Australia: 2017-2057
NB: Base case assumes a unit discovery cost of A$70/oz rising by $10/oz per decade.

74
0
10
20
30
40
50
1995 2005 2015 2025 2035 2045 2055
Unreported (Est)
Actual
A twofold-to-threefold increase in exploration
efficiency is required…
Moz
Forecast >
BASE CASE
1.5x Improvement
2.0x Improvement
3.0x Improvement
74
Effect of improving exploration performance on the likely amount of gold found in Australia: 1995-2057
Caution: Forecast figures are ‘mean’ only. In any given year the likely figure may vary by +/-40%. NB: Analysis assumes that exploration performance
(discovery cost per ounce) is progressively improved over 10 years from 2018-2027. Base Case assumes a discovery cost of A$70/oz , rising by $1/oz pa.

75
0
2
4
6
8
10
12
14
16
1995 2005 2015 2025 2035 2045 2055
…to sustain (or increase) Australian gold
production…
Moz pa
Forecast >
BASE CASE
9.70 Moz
in 2017
10.17
6.88
1.5x Improvement
2.0x Improvement
11.34 Moz
in 2021
3.0x Improvement
4.69 Moz
6.70 Moz
8.74 Moz
13.02 Moz
75
Effect of improving exploration performance on gold production in Australia: 1995-2057
NB: Analysis assumes that exploration performance (discovery cost per ounce) is progressively improved over 10 years from 2018-2027.
Base Case assumes a discovery cost of A$70/oz , rising by $1/oz pa.

76
0
2000
4000
6000
8000
10000
0
2
4
6
8
10
2015 2025 2035 2045 2055
Discoveries &
Production (Moz pa)
Additional Ounces Found
[< LH Scale]
Additional Gold Produced
[< LH Scale]
Additional Revenue
[RH Scale >]
Additional Employment
[RH Scale >]
Revenues (2017 A$M)
and No. of Workers (#)
7,160
workers
$6,232M
4.05 Moz
6.24 Moz
76
Impact of 2x improvement in exploration performance incremental change over the base base
NB: Analysis assumes that exploration performance (discovery cost per ounce) is progressively improved over 10 years from 2018-2027.
Base Case assumes a discovery cost of A$70/oz , rising by $1/oz pa.
…with the associated positive impact on
revenues and employment

77
11. CONCLUSIONS
77
Image: Runway at Gruyere gold mine, Western Australia (KCGM)

78
1. Landmark report – looks out 40 years – critically includes the impact of resource quality,
exploration, and uncertainty;
2. Over the short-term (<5 years) production will be dominated by existing mines;
3. Over the medium term (5-10 years) production will come from new mines based on known
deposits, however, it is not enough to offset the decline (mainly due to ‘quality’ issues);
4. In the long term (10-40 years) exploration success will play a major role in overcoming much
of the looming shortfall in gold production…
5. Consequently, in forty years-time almost all of Australia’s future gold production will come
from exploration successes…
6. …even so, production and revenues are set to fall by half over the next 40 years;
7. Also note that in 13 years half of Australia’s gold production will come from mines that are
yet to be discovered…
8. …but the weighted average delay between discovery and development is also 13 years;
9. For the gold industry to maintain production at current levels over the longer term, it will
either need to double the amount spent on exploration or double its discovery performance;
10. And finally, with sensitivity studies indicating each additional dollar spent on exploration
(over the next ten years) generates extra revenue of ~$11.40 over the next 40 years there is
incentive for both industry and government to further invest in gold exploration!
Quantifying the importance of exploration on
the future of Australian gold mining
78

79
A final note on ‘peak’ forecasts…
• The study is a ‘business-as-usual’ forecast – it is not a
‘peak’ forecast per se [exploration and innovation are
considered in an very detailed manner];
• As Dryblower suggests ‘peak’ forecasts are nearly
always wrong [citing the example of the Hubbert Curve
in oil], as exponential growth is always contained by an
assumption of finite resources;
• Supply will meet demand over the long term – due to
some unspecified discoveries and innovations we can’t
yet determine [Dryblower notes the Pilbara
‘conglomerate gold’ as an example];
• However, the expected supply does not have to come
from Australia [and to an extent it does not matter to us
commentators whether we’re writing about gold mines
in Australia or elsewhere in the world];
• National industries do decline if they become
uncompetitive – think South African gold, US copper, or
British coal [or Australian cars];
• Thus, industry and government (i.e. “us”) must take the
initiative to invent its own future;
• This includes developing policies that stimulate
exploration, but also innovation that makes exploration
more effective – critically greenfields exploration in new
‘search spaces’…
• …the challenge is that we need to act now!
79

80
Contact details:
Richard Schodde
Managing Director, MinEx Consulting
Melbourne, VIC
Email: Richard@MinExConsulting.com
John Sykes
Strategist, MinEx Consulting
Perth, WA
Email: John.Sykes@MinExConsulting.com
Website: MinExConsulting.com
Copies of this and other similar
presentations can be downloaded
from the MinEx website

Australian gold in 40-years: The need for greenfields exploration

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