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Resource World Magazine Volume 18 Issue 3

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A P R I L / M A Y 2 0 2 0 www.resourceworld.com 53 The last few years have seen the Aussie dollar gold price move between US $1,500- $1,700/oz, giving Aussie gold miners a comfortable margin on top of the physi - cal gold price." In other words, Australian companies are cashed up. However, Russell says the more impor - tant factor is currency parity. "But most importantly, the Aussie dollar and the Canadian dollar are of similar value. So Canadian assets, in particular, aren't much more costly than buying in Australia," Russell wrote. At the time of writing this article the Australian dollar was buying 0.89 Canadian dollars. In a 2017 report, BMO Nesbitt Burns Brian Quast pointed to other factors that might explain why the Australian invasion has taken hold. "Australian mines tend to generate more free cash flow than Canadian mines," argues Quast. "Anecdotally, Australian miners have embraced tech - nology more readily than their Canadian counterparts, leading to enhanced min- ing efficiencies. The more prevalent use of contract miners has also given a higher degree of labour flexibility in a volatile labour environment for the gold industry," he observed. Quast also observed that Australian miners use technology to a much greater extent than their Canadian counterparts. "Perhaps the most obvious difference between a typical Australian underground gold mine and a typical Canadian under - ground gold mine is the deployment of technology," he writes. And of course there are investment rea- sons peculiar to each transaction which come into play although there are some common themes. In the case of Evolution Mining's Red Lake acquisition, the undoubted familiarity of Canada as a sta- ble jurisdiction like Australia was a factor, as was the opportunity for the company to establish a 'beach-head' operation in one of Canada's most prolific gold districts. In a presentation explaining the transaction, Evolution said that there are a number of quality projects in the area" within "trucking distance of the Red Lake mills," and that owning Red Lake gives Evolution Mining the "…opportunity to expand footprint over time through regional consolidation." The idea of a 'beach head' in a stable political and social environment was also a key factor in Saint Barbara's acquisition of Atlantic Gold's project. It told investors that "diversification of St. Barbara's production base with a low cost asset in a favourable jurisdiction; and a platform for future growth in an attractive mining jurisdiction with low geopolitical risk," were key factors in its investment. Similarly, Newcrest has cited the stability of British Columbia and Canada generally as being an important fac - tor in its decision to buy into the Red Chris operation. The deal provides "immediate asset, geographic and earnings diversifica- tion", the company said. But it is not just the low risk political and social environment that makes Canada a natural fit for Australian mining invest - ment; it's the prospectivity that excites many. Australian explorers have also been active in buying into Canada. These invest - ments include Chase Mining Corporation Ltd. [CML-ASX] which is pursuing a multi- commodity program focused on advancing the 100%-owned Belleterre-Angliers Greenstone Belt (BAGB) nickel-copper-PGE and gold projects in southwestern Québec. Matador Mining's Cape Bay project is a major play, with the company announcing, on February 4 this year, that the resource has increased by 18% to 1.2M ounces of gold and 3.9M ounces of silver (16.6Mt at 2.2 g/t gold and 7 g/t silver). 55% of this resource is classified in the Indicated cat - egory (650,000 oz gold at 2.9 g/t gold). And next door to the famous Red Lake district in Ontario is another Australian explorer Ardiden Ltd. [ADV-ASX] which, having acquired the Pickle Lake gold project in 2018 has been busy adding ground in the district. In March this year it announced that it has expanded its land - holding at the Pickle Lake gold project to just less than 500 km 2 through the staking of additional highly prospective green- stone belts which are both contiguous and along strike of historical gold mines and known gold deposits. Two months earlier the company more than doubled the size of its Canadian exploration ground, by taking up the New Patricia gold prospect. Both Pickle Lake and New Patricia are historic mines. So is this Australian mining and exploration investment in Canada a long term strategy? As always, it's hard to say because currency fluctuations, the Australian dollar gold price, labour and technology advantages, and jurisdictional risk issues are all capable of heading into negative as well as positive territory. But one difference between the two investment markets does not look like changing all that soon. The Australian capital markets are still less diverse and more traditional than their Canadian coun - terparts. That means the sort of capital drought issue which the latter has experi- enced in recent times is less likely to occur in Australia. As BMO Nesbitt Burns Quast put it in a note to clients in May last year; "Australian producers currently hold the upper hand in valuation, free-cash-flow generation and market caché to purchase Canadian assets, many of which have struggled might - ily of late." In other words, watch out for more Australians stepping off the plane in Vancouver and Toronto. n ❝ CASHED UP AUSTRALIAN COMPANIES HEAD TO CANADA TO BUY PROJECTS AND DEVELOP THEM. ❞ AUSTRALIAN UUPDATE

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