While global financial markets fixate on central banks slashing interest rates, gold prices have been surging to new heights, creating an opportunity that many have overlooked. In a year where gold prices have risen over a quarter, surpassing US$2,600 an ounce, the precious metal is enjoying renewed attention as a hedge against inflation and market volatility. This marks a significant moment for gold enthusiasts, with investors rediscovering the value of this traditional safe-haven asset.
For those old enough to recall, gold hovered around US$1,200 an ounce during the global financial crisis, a time of immense uncertainty. The price spiked again during the COVID-19 pandemic, nearing the US$2,000 mark as the world grappled with unprecedented challenges. Now, with inflationary pressures seemingly tamed by sharp interest rate hikes, gold has surged again, drawing renewed interest from investors across the globe.
However, the appeal of gold extends beyond its price surge. The New Zealand Exchange (NZX), which has long been devoid of significant extractive sector stocks, is witnessing a renaissance. OceanaGold, a familiar name in mining, has seen its shares rise by an impressive 51% this year. But the standout performer has been Santana Minerals, a Central Otago-based prospector, which has seen its stock soar by 84% since its July listing on the NZX.
Veteran broker Chris Lee has played a significant role in sparking local interest in Santana Minerals, whose Bendigo-Ophir project is generating excitement. At the recent Precious Metals Summit in Beaver Creek, Colorado, Santana CEO Damien Spring highlighted the company’s optimism about the project, outlining plans to begin mining operations by 2027, pending government approvals. With the spot price of gold currently at US$2,500 an ounce, Santana is projecting annual production of 110,000 ounces over the next decade, translating to US$2.8 billion in revenue and US$1.4 billion in profit over that period.
This potential gold rush comes at a time when the New Zealand mining sector is seeing a resurgence. According to government data, employment in the sector increased to 8,800 by the end of June 2024, up from 6,700 in March. This rise in employment reflects the broader revival of mining in the country, as companies like Santana aim to bring new projects to life.
Yet, while the financial prospects are enticing, there remains a degree of hesitation around mining, particularly regarding its environmental impact. Despite the jobs and economic activity that mining projects bring, some remain wary of the industry’s environmental footprint. However, Santana’s fast-tracked project could be the beginning of a new era for New Zealand’s gold industry, particularly if the government’s fast-track laws for project approvals are enacted.
At the heart of the matter is whether Santana’s ambitious projections will materialize. At current gold prices, the Bendigo-Ophir project stands to generate significant profits, but even at a more conservative price of US$1,650 per ounce, the project remains economically viable. With a cash cost of US$538 per ounce, well below the US$901 per ounce cost at OceanaGold’s Macraes mine, Santana’s project presents an enticing opportunity for investors.
As gold prices continue to climb and mining companies ramp up production, New Zealand may be on the cusp of its own gold rush. For investors, the next few years could reveal whether this new wave of mining activity will live up to its golden promise. If Santana Minerals’ projections hold true, the company could spark a resurgence in gold mining that extends beyond the hills of Central Otago, bringing goldbugs back into the fold.
