Pierce Points: Infrastructure is Key for Huge Gold Deposits

Dave Forest, author at Pierce Points explains (on the back of current news) why infrastructure is so important for these deposits…

Very interesting data points this week on two of the world’s largest gold projects.

First, the negative. In Alaska, major producer Anglo American announced it is pulling out of the Pebble gold-copper project. Anglo is writing down $300 million spent on the project since 2007 and walking away.

Contrast this with (possibly) positive news from the massive Minas Conga gold-copper deposit in Peru.

Peruvian Mines and Energy Minister Jorge Merino said at a recent mining conference that round table discussions with dissident residents near the deposit may be making headway. Potentially paving the way for its owners (including gold major Newmont) to develop the stalled project.

Interesting that we have one major throwing in the towel while another appears to be persevering. What does this tell us about the current project development environment?

Both Pebble and Conga are world-class geologically. Pebble is probably the world’s largest undeveloped gold deposit. Conga is likely in the top ten.

Both are controversial. Vigorous protests have been a material impediment to development, costing owners time and money.

Here’s one difference that may explain the differing tack of each project’s big player: infrastructure.

Conga is located in the shadow of the massive Yanacocha mining district. Newmont has stated it plans to “leverage existing operations” here to help with capital and operating costs.

Pebble by contrast, is hundreds of kilometres from major road infrastructure. And distant from any significant mining operations.

Is this factor causing one project to shovel on while the other is shelved? There’s no way to know for sure. Perhaps Anglo American and Newmont have different world views. Or maybe it’s other intervenors like local costs or permitting environment.

But in the current mining downturn it’s interesting to see which projects are emerging as the survivors. There’s a lot of talk today about cost management and rationalization. You’d think that in such an environment, good infrastructure would be climbing the “most desired” list for developers.

Here’s to being in the right place at the right time,

dforest@piercepoints.com / @piercepoints / Facebook