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Drought won't rain on gold miners' parade

20 May 2020


Fears the Australian gold sector's boom conditions will be disrupted by drought have been eased, with miners saying there is no longer a risk of production being curtailed in the coming year thanks to the breaking of the drought.Less than four months after it warned its flagship Cadia mine may have to reduce production before Christmas because of water shortages, Newcrest Mining said on Wednesday the crisis had been abated.


We now believe that Cadia has secured adequate levels of water to ensure that production is not constrained by water for at least the next two years and possibly beyond,'' said the company.Aside from improved rainfall at the mine near Orange in NSW, Newcrest said the purchase of water entitlements, the drilling of new bores and water savings initiatives had also helped.The improved conditions are timely given gold in Australian dollar terms remains near all time highs of $2668 per ounce; well above the $200 approximate cost faced by Cadia to produce an ounce of gold in the first three months of the year.


Cadia was Australia's most lucrative gold mine in fiscal 2019, having generated well in excess of a billion dollars worth of earnings.Newcrest's disclosure comes after rival NSW gold miner Evolution said last month the immediate water challenges at its Cowal mine had eased thanks to rains and initiatives to pipe more water into the mine.Water pressures have also eased at China Molybdenum Corporation's Northparkes mine in NSW, which in September 2019 flagged it may have to reduce production by next month if the drought did not ease.In March, a Northparkes spokesman said there were no longer foreseeable impacts to the mine's output because of water.The mines in far-western NSW near Cobar have also enjoyed strong rains the past three months, in welcome relief for companies like Glencore and Aurelia Metals.Cobar's rainfall in the past three months has been on par with total rainfall in 2019.


That situation has occurred in much of Australia's eastern seaboard; Melbourne got more rain in the first four months of 2020 than it did in all of 2019, and has continued receiving regular rain in May.

Melbourne's dams are now higher than they were in three of the previous four months of May.Gold prices have improved to $US1744 per ounce from $US1450 in the past six months amid fears the coronavirus pandemic will trigger a global recession and subsequent rounds of quantitative easing.Australian-denominated gold breached $2000 per ounce last June and has further climbed thanks to a weakening Australian dollar against its US counterpart, and surging prices for the precious metal.