Gold output up 38%, potential for further growth remains
Our Gold and base metals SBU manages our gold and copper businesses. Ma’aden’s 2025 strategy identifies significant growth potential for gold and copper over the next decade through a combination of operational excellence programs and new projects. Our gold production target remains 500,000 ounces but we are working to identify opportunities to go beyond this. Our learning from Ad Duwayhi will enable smoother and more efficient execution and startup of Mansourah, Massarah and Ar Rjum projects.
Ma’aden Gold and Base Metals Company (MGBM), our wholly owned subsidiary, operates six gold mines: Ad Duwayhi, Mahd Ad Dhahab, Al Amar, Bulghah, Sukhaybarat and As Suq. We produced about 225,000 ounces of gold in 2016, up by 38 percent from 2015 levels.
In 2016, we continued to ramp up production at Ad Duwayhi which came into commercial production on April 1, 2016, overcoming operational challenges that are typically associated with a complex new plant of this size.
Ad Duwayhi is the largest of our gold mines, which will contribute 28 percent of our gold output over the next five years. Its reserves are estimated at 1.9 million ounces of gold and the mine occupies an area of around one square kilometer. The feasibility study for the Mansourah and Massarah projects is completed. Ar Rjum is currently being reviewed to refine economic parameters before going into the feasibility study stage.
Cash generation and optimization
The Gold and base metals business review has resulted in significant cash generation and production optimization initiatives that we expect to be implemented over the next five years. These initiatives highlight the level of experience and expertise within Ma’aden, proving that our past investments in human capital development are paying off.
The initiatives to optimize production, combined with the anticipation of Mansourah, Massarah and Ar Rjum projects, have enabled us to revise our 2022 gold production target to more than 500,000 ounces. Our learning from Ad Duwayhi will enable smoother and more efficient execution and startup of Mansourah, Massarah and Ar Rjum projects. Compared with our older small-scale mines, these new mines will be medium-scale operations yielding higher economies of scale.
After several years of decline, gold prices recovered in 2016 resulting in higher annual revenue. Up to 50 percent of gold consumption continues to be driven by the jewelry sector. Private investors in gold bars, coins and exchange traded funds, central banks and applications in technology are the other key sources of demand for gold.
We have also revised the zinc flotation circuit at Al Amar mine, targeting an increase of more than 30 percent in zinc recovery, which is expected to result in higher output in 2017.