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Is Australia’s Pilbara Gold Rush Worth The Hype?

Kitco News

Is Australia’s Pilbara Gold Rush Worth The Hype?

(Kitco News) - ‘Real caution’ is advised when it comes to Australia’s latest gold rush, according to Melbourne-based gold mining consultants, which say that only time will tell if any of the new ventures pan out.

“It is good to see such interest in gold exploration locally but real caution is needed,” Sandra Close, managing director of Surbiton Associates, said in a release published on Sunday.

“It is very early days and despite the publicity, there is a great difference between an exploration play and a successful mining venture. Exploration is a risky and expensive business,” Close noted.

All the hype around the gold rush in Western Australia’s Pilbara region is understandable as more than 25 publicly listed companies are scouring the region for gold, the media release pointed out.

“The target is gold that occurs in conglomerates – sedimentary rocks composed of rounded pebbles in a finer grained matrix. Rocks of a similar type and age in the Witwatersrand basin host the major gold deposits which have been the source of much of South Africa’s wealth for more than 100 years,” Close explained.

Important to keep in mind is that Pilbara was already tested for similar deposits in the late 1970s and the first half of the 1980s by one of Australia’s distinguished mineral explorers, Mark Creasy, who found that the “overall grades were too low to support economic development.”

“Despite the parallels, the latest search in the Pilbara should be kept in perspective … These types of occurrences involve one of the classic challenges of sampling, the problem of the ‘nugget effect’,” Close said.

The ‘nugget effect’ refers to assumptions made by explorers when sampling an area — finding or not finding a nugget in the sample sometimes leads experts to a wrong conclusion about the actual mineral composition of the land.

“Dealing with the ‘nugget effect’ is an expensive and time consuming business,” Close pointed out. “Such exploration involves collecting and processing a large number of large samples in order to obtain reliable results.”

Overall, gold production in Australia remained “relatively steady” in Q3, totaling 74.1 tonnes, which is 1.4% less than in the previous quarter. “It was the usual case of swings and roundabouts,” Close said.

Surbiton Associates also discussed Western Australia’s failure to introduce a 50% increase in gold royalty for the second time, noting that there is a lack of understanding around the effects of cost increases.

“I am all in favor of a fair return to the community for the minerals they own,” Close said. “But it makes little sense to increase the royalty so that the economic cut-off grade rises and gold is left in the ground that was previously economic to mine.”

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