Refractory gold reserves: Challenges and opportunities for a key source of growth

Gold miners are facing a reserves crisis, and what is left in the ground is becoming more and more challenging to process. Refractory gold reserves, which require more sophisticated treatment methods in order to achieve oxide-ore recovery rates, correspond to 24 percent of current gold reserves and 22 percent of gold resources worldwide (Exhibit 1). Despite offering a higher grade, these ores can only be processed using specific pretreatment methods such as ultrafine grinding, bio oxidation, roasting, or pressure oxidation (POX). This special treatment is required for two reasons: first, to liberate gold particles encapsulated in sulfide or arsenic minerals; and, second, to eliminate carbonaceous material occurring in the ore, which adsorbs dissolved gold instead of active carbon that is normally added to the leaching solution.

According to MineSpans analysis, approximately one-quarter of the gold in geological reserves and resources can be considered refractory, and most is located in regions with a long history of gold exploration and mining, as well as a lower investment risk, such as North America, Oceania, and the Commonwealth of Independent States (CIS). It is important to note that the additional processing steps required for treating refractory ores generate additional costs compared with conventional plants; however, the reserve grade for these ores is on average 86 percent higher than those of nonrefractory-type deposits (2.25 grams per metric ton on average, versus 1.21 grams per metric ton for nonrefractory ores).

Our analysis shows that, in the near future, production from refractory-type deposits is expected to grow at a higher rate than production from nonrefractory ores (Exhibit 2). This production growth for refractory ores can be explained by analyzing two main factors: costs and grade.

Our analysis of recently developed and planned gold projects for refractory and nonrefractory ores found that:

Thus, according to MineSpans data, 54 percent of gold production from refractory deposits comes from mines situated in the bottom half of the cost curve, while only 18 percent sits in the fourth quartile (Exhibit 5). This high-grade effect is expected to remain in place at least until 2023, but grade erosion should dampen it over time.

In order to generate the most value from refractory gold ores and prevent longer-term distress due to grade erosion, we see three main areas for action that miners should consider:

Miners can tap into the opportunity for lower costs per ounce offered by higher-grade refractory gold reserves. However, when considering this potential, they need to factor in higher capital and operational costs. The winners will be those that pay close attention to optimizing mine design, maximizing plant performance via digital technology, and asset-portfolio planning.

Gabriel Motta is a specialist in McKinsey's São Paulo office, Michal Polcyn is a consultant in the Wroclaw office, and Elijah Saragosa is a consultant in the Toronto office.

The authors wish to thank Jonathan Lindley for his contributions to this article.