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LAWRIE WILLIAMS: Australia gold production nearly No. 1 globally

According to Melbourne-based specialist gold consultancy, Surbiton Associates, Australia is the world’s second biggest gold producer and at one time in the past year had looked as if it might displace China as the world No.1.  However this was not to be as a number of Covid pandemic-related issues caused the country’s gold output to fall back a little as the year progressed and it ended up coming in in second place again among the global gold producing nations.

It should be noted here that Surbiton’s assertion that Australia is the world’s No.2 gold producer is slightly contentious as independent London-based precious metals consultancy, Metals Focus, puts Russian output marginally higher than that of Australia – or at least it did in 2020 – but the 2021 assessment has not yet been published.  Russia will have suffered similar Covid-related production issues last year, and U.S. sanctions – which have led to Kinross witrhdrawing from the big Kupol gold mining operation will almost certainly have affected that nation’s current gold output levels.

According to Surbiton, which as being Australia-based is probably in a better position to assess the country’s gold mine output, Australian gold production in 2021 totalled 315 tonnes, or 10.1 million ounces. This was therefore a little lower than the peak production levels recorded in 2019 and 2020.The consultancy put  local gold output for the first half of the 2021 year slightly ahead of China but this was not sustained later in the year, so according to Surbiton’s figures, Australia remains in second place globally.

“Compared with 2020, Australian gold production in 2021 declined by 12 tonnes or four per cent,” said Dr Sandra Close, a director of Surbiton Associates. “There are a number of factors which have contributed to the fall, many of which are a result of the pandemic.”

Western Australia, which produces around three-quarters of Australian gold, closed its borders in mid-March 2020 to restrict the spread of COVID-19. Its border was not finally reopened until 3 March, 2022, just three days ago.

“Although the gold producers continued to operate extraordinarily well under the circumstances, the restrictions imposed due to the pandemic have had an increasing impact,” Dr Close said. “Personnel shortages and burn-out have been taking a toll and during 2021 production has been negatively affected.”

The availability of fly-in-fly-out workers from other states – an important element in gold mining in remoter areas of the country - has been particularly limited. There has also been a shortage of haul truck drivers, plus shortages of some supplies and disruption to interstate haulage. Assay laboratories, for example, are just one of the many service industries also affected, with a substantial increase in the turn-around time for sample analysis.

“A consequence of the shortage of haul truck drivers, is that there has been a restricted supply of higher-grade ore at some processing plants,” Dr Close said. “This has placed a greater reliance on the treatment of lower grade stockpiled material.”  Dr Close noted that this appears to have been a contributing factor to the lower overall gold production for the 2021 year.

 The gold price in 2021 has been supportive – particularly in Australian dollar terms.  Dr Close noted. “The 315 tonnes of gold produced in 2021 was worth around A$25.5 billion at the average price for the year, which was a substantial contribution to Australia’s exports.” 

The gold price has since received a further boost following the Russian invasion of Ukraine.  “The gold market thrives on uncertainty,” Dr Close said. “It is not really surprising to see buoyant gold prices at present, given the huge concerns regarding the situation in Ukraine, as well as rising inflation in the US and elsewhere.”

Given that in the final quarter of 2021, Australian gold mine production, according to Surbiton, rose by four percent to 81 tonnes this bodes well for the overall gold production total in the current year.  With Chinese gold output seemingly continuing to fall back year on year one suspects that there is a good chance of Australian gold ouput getting close to matching that of China this year.

On significant specific mines basis, Newmont’s operations at Tanami and Boddington both increased production by around one tonne, or approximately 32,000 ounces each, in the December quarter. Also, Northern Star’s Super Pit production was up 22,500 ounces and Gold Fields’ St Ives output increased by 16,500 ounces.  But by comparison, production at Kirkland Lake’s Fosterville operation in Victoria was down around 26,600 ounces for the December quarter, mostly due to lower throughput.

“Despite the Covid problems, exploration activity for gold, lithium minerals, rare earths and base metals, continues apace,” Dr Close said. “Activity in the mining and resources industry is the strongest I’ve seen for years. A steady stream of announcements continues to flow into the Australian Securities Exchange, including reports on new discoveries, drilling results, capital raisings and initial public offerings.”

Some of this activity will have been further stimulated by fears over Russian ongoing exports for many metals and minerals for which it is a leading global producer.  This will have been due to the imposition of enhanced Western sanctions on Russia over the latter’s Ukraine invasion, although these may be interpreted rather differently among some nations which rely heavily on imports of Russian commodities.

For the record, Australia’s largest gold producers for the 2021 calendar year were as follows:

            Operation                Ounces                                 Owner

Boddington              696,000                    Newmont

Cadia East                 598,670                    Newcrest

Fosterville                 509,600                    Kirkland Lake

Super Pit                   490,112                    Northern Star

Tanami                      485,000                    Newmont

21 Mar 2022 | Categories: Gold, China, Russia, Mining

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