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LAWRIE WILLIAMS: 2019 Aussie gold output at new record 325 tonnes

We had been speculating that Russia, which has been increasing new mined gold output year on year might be moving towards becoming the World’s second largest gold producer after China and leapfrogging Australia, but the latter has also been increasing gold mine production and has almost certainly retained its No. 2 spot in 2019.  Indeed, if output growth continues to advance, and Chinese gold production in 2020 continues to fall – the coronavirus may well have an impact – the gap between Chinese and Australian gold production may well narrow sharply this year.

The latest figures for Australia’s calendar year gold production have come from Melbourne-based consultancy, Surbiton Associates, which specialises in Australian gold analysis and is thus probably closer to providing the most accurate figures on the country’s gold production than other non-Australian-based consultancies.  Surbiton estimates Australia’s 2019 gold production at an all-time record of 325 tonnes, boosted by record December quarter output of 87 tonnes – the previous record having been achieved in the June quarter last year of 82 tonnes.  The September quarter had been disappointing largely due to weather issues adversely affecting some major mining operations.

“In addition to 2019 having the highest ever gold production in Australia, the December 2019 quarter was really outstanding,” said Dr Sandra Close, a director of Surbiton Associates. “The record output was due to new projects coming on stream and ramping up production, other operations recovering from poor performances in the September quarter and some increases in throughput and grade.”

The weaker Australian dollar against the U.S. dollar in which gold sales are recorded has helped the miners considerably – particularly given the U.S. dollar price has generally been rising throughout 2019. “The Australian dollar gold price averaged a record A$2,168 per ounce in the last three months of 2019, due to the higher U.S. dollar gold price and a weaker Australian dollar exchange rate,” Dr Close said. “Since then the Australian dollar gold price has continued to rise, hitting a record high of A$2,529 per ounce on 24 February 2020.”  Dr Close went on to say that at a gold price of A$2,400 per ounce, the 2019 output was worth more than A$25 billion, making gold one of Australia’s major export earners.

As well as many Australian gold mining companies taking advantage of the rising spot gold prices, particularly in local dollar terms, they also are locking in additional price hedging by increasing or restructuring their hedge books. These are simply rational risk reduction measures to guard against any decline in the Australian gold price, Dr Close commented.

Australia’s largest gold producers for the 2019 calendar year were:

Operation

Ounces

Owner

Cadia

871,246

Newcrest

Boddington

703,000

Newmont

Fosterville

619,367

Kirkland Lake Gold

Tropicana - JV

513,433

AngloGold Ashanti 70%, Independence Group 30%

Tanami

500,000

Newmont

 “Gold retains a certain safe-haven status and its price often rises with uncertainty,” Dr Close said. “In addition to various economic and political concerns in 2019, lately we are also seeing a reaction to the coronavirus outbreak and its effect on industrial activity in China, plus its effect on the economies of other countries and the impact of reduced global travel and tourism.”

2019 saw the sale of the Newmont/Barrick KCGM joint venture, which operates the Kalgoorlie Super Pit, to Saracen Mineral Holdings and Northern Star Resources as both North American mining companies were continuing with their sales of what they considered non-core assets.  The Super Pit is one of Australia’s largest gold mines. But production there has been curtailed for the past couple of years due to a pit wall failure in mid-2018 which has prevented mining access to what is thought to be a high grade area of the pit floor.  To fix the pit wall problem is estimated to take 3 ½ years still, but meanwhile there are other plans afoot to boost production in other parts of KCGM’s pits and underground operations.

Dr. Close comments:  “The ownership changes bode well for the future, and both Saracen and Northern Star have undertaken substantial further gold price hedging in support of their new acquisitions.”

2019 also saw the opening of the Gruyere mine in Western Australia, owned equally by South Africa’s Gold Fields and Australia’s Gold Road Resources, which started up mid-year, ramped up rapidly to reach its full rated capacity, with production of 70,000 ounces of gold in the December quarter.

“Smaller, less well-known start-ups included Adaman Resources Pty Ltd’s Kirkalocka operation in WA which produced about 10,000 ounces in the December quarter and plans an annual output of some 135,000 ounces,” Dr Close said. “As well, Kirkland Lake Gold’s Union Reefs plant in the NT re-commenced production, yielding 8,700 ounces for the quarter and it aims to produce 100,000 ounces annually.”

 Among those with substantial increases in gold output in the December quarter was Newcrest Mining’s Cadia East mine in New South Wales which produced 68,000 ounces more gold than in the previous poor quarter, while Gold Fields’ St Ives, Western Australian operation lifted production by 32,600 ounces.

 “Kirkland Lake Gold’s Fosterville mine in Victoria, continues to shine,” Dr Close said. “It reported an average grade of an extraordinary 49.3 grams per tonne gold for the quarter, resulting in an increase in production of 33,600 ounces, making it now Australia’s third largest operation on a quarterly and annual basis.”

There has been much talk of Peak Gold but increased production from major gold mining nations like Australia and Russia is largely offsetting production falls from traditional gold producing nations where aging mines are closing and grades are declining.  Environmental strictures are also leading to falling gold production in some areas.  These rises and falls are tending to balance one another out so for the time being global gold production is effectively plateauing at around 3,300 tonnes per year.  Contributing to this is a fall in exploration which has led to few, if any, major new gold deposits being found and if and when they are it may take many years for them to be permitted and brought into production.  Thus we will probably see global gold output beginning to fall in the years ahead.

2020 may also see a knock-on effect from the coronavirus leading to reduced production from base metal mines where gold is an important by-product  China is the biggest consumer by far of many of these metals and any interruptions to its huge smelting and refining operations are bound to have an impact on byproduct gold deliveries

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01 Mar 2020 | Categories: Gold, Dollar, Mining

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