The era of the mining industry is over to many Malaysians given the fact that industries such as manufacturing, oil palm plantation and tourism, have played a more prominent role in terms of driving economic growth.
However, Peninsular Gold Ltd (PGL) chair Datuk Seri Andrew Kam begs to differ. Two-years ago, Kam set up PGL and floated its shares on the Alternative Investment Market in London to raise capital to venture into gold mining in Raub a historical gold town in Pahang.
PGL’s mission is to discover five million ounces (oz) of gold in Bukit Koman, Raub where its mine is located.
Assuming a gold price of US$690 per oz, Kam said a simple calculation would show that one million oz of the precious metal would be worth US$690 million (RM2.1bil). “You can imagine the earnings prospects of the venture at such a high gold price,” Kam told StarBis, adding that there was a shortage of 1,500 tonnes of gold globally.
Apart from expanding industrial demand, he pointed out that the increasing affluence in emerging economies such as China, India and Vietnam, would fuel demand for the metal.
Traditionally, gold is considered a way for one to preserve wealth, particularly among the elderly Asians.
A wedding ceremony will not be complete without gold jewellery in most parts of Asia.
Kam strongly believes that gold mining in Malaysia will regain its shine although it rarely crosses people’s minds that the industry is still economically viable. “The central gold belt in the peninsular is still rich in gold. In fact, no one has ever conducted any study on the size of the gold reserve in Malaysia,” Kam said.
The central gold belt is the source of the majority of the gold deposits in the peninsular. The gold reserve lies between the western and eastern tin belts. It extends from Kelantan (Sungai Pergau, Sungai Galas) to Pahang (Merapoh, Kuala Lipis, Raub), Terengganu (Lubuk Mandi), Negri Sembilan and Johor (Gunung Ledang).
Kam is proud of the support he has managed to garner from foreign financial institutions despite the cold shoulder from rest of the financial industry at home. “The foreign bankers see the value in PGL because they understand the mining industry. They know that Raub was well known for its gold mining before. Furthermore, the political risks are minimal and cost of production is low in Malaysia,” Kam said.
Nevertheless, he realises there are bigger gold mines elsewhere. However, political factors pose major risks to miners in certain parts of the world where government policies may change overnight.
Against the backdrop of spiralling gold prices together with advanced mining technology from abroad, Kam’s gold rush makes commercial sense. A British metallurgical process and laboratory consultant Peter Wallwin said eight tones of gold were produced in Raub in the old days. “The conventional way of gold mining was not efficient those days. So there is still a considerable amount of gold reserve left behind,” he said during a visit to PLG’s gold mine in Raub.
Wallwin, who travels around the world for consulting jobs, noticed that PLG’s mine was small in size compared with others that he has seen in Australia or Africa. However, with modern technology and the high gold price, he says it was time to start extracting from the old mine. “The advantage of the new technology is that it can recover up to 85% of gold from the tailings, compared with 15% using traditional gravity methods,” Wallwin said.
Tailings deposits are residues left behind by earlier miners who used older conventional methods of gold extraction and failed to obtain the maximum gold yield from the soil.
The precious yellow metal is riding high on the global commodities price boom. The price of gold has been climbing steadily since the turn of this century and has nearly tripled from the US$260-level in 2000. The spot price was at about US$746 per oz on Friday. “There is still room for it to go higher,” Kam commented. Many gold mines have been abandoned over the past two decades, he said, with production revived only in 2004. “Production has yet to cope with the growth in demand. This will continue to support gold price,” Kam said. In addition, the weakening US dollar also attributed to the soaring gold price.
Having raised funds in London, PGL is spending RM60 million to build a carbon-in-leach gold processing plant. The company has hired South African-based Time Mining and Processing Ltd to be the project manager for its plant. Time Mining specialises in design, construction and safe operation of carbon-in-leach gold plants. The plant will be sited on a mine which has been in use since 1890 in Raub.
The plant has the capacity to process up to 1.1 million tonnes of tailings a year.
PGL has announced to AIM that the plant was expected to produce gold by the end of next year at a rate of about 25,000 oz annually, with projected costs of less than US$200 per oz versus the current gold price of above US$700.
A recent resource assessment has indicated that gold reserves of 202,000 oz could still be extracted based on the total tailings at the mine.
Kam holds a 63% stake in PGL. Other major shareholders include Bandar Raya Developments Bhd chair Datuk Mohamed Mois, who owns 9.9% and J P Morgan 6.6%.