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LAWRIE WILLIAMS: Australian Q1 gold output falls, but still closing on China

According to most observers, the world’s top three gold producers are China, Russia and Australia, although differences in reporting production data means that it is uncertain which nation takes second place behind China.  Also China’s production decline is almost certainly leading to either Australia or Russia closing the gap on the World No.1 – and whether global gold output has indeed peaked.

The latest figures out of Melbourne-based specialist gold consultancy Surbiton Associates don’t actually help clarify the overall position, although they do suggest that both Australian and Chinese gold production was sharply down in Q1, perhaps confirming that peak gold is already with us.  Given the world is still reeling from the impact of the COVID-19 virus pandemic, one wonders if any apparent turndown in global gold production this year will  only be  temporary, or permanent.  Suffice it to say that at this stage it is probably too early to tell, or if China’s position as world No.1 gold producer is under threat from its would-be usurpers.  Probably not this year, but in the medium to long term who knows?  The Surbiton figures do suggest that 2021 may indeed see a decline in total global gold output, and even if figures do recover in 2022, the overall trend remains flat to downwards.

Surbiton notes that Australia’s gold production in the March quarter this year was a little more than 74 tonnes. This is almost nine tonnes, or eleven per cent less than for the December 2020 quarter.  The March quarter is usually the weakest of the year, but even so the reported figure is about 3 tonnes down on the equivalent quarter in 2020.   As an Australian domestic consultancy, and one that specialises in gold, Surbiton’s figures tend to be accurate and probably the most reliable available.

“While gold output for the quarter was down considerably, this is no cause for concern,” said Dr Sandra Close, a Surbiton director. “Production was about three tonnes or four per cent less than the corresponding March 2020 quarter and such variations are not uncommon.”

The January-March quarter is the shortest quarter of the year and usually has the lowest quarterly production. Also, early in the year output is often affected by cyclonic weather in northern Australia, although, according to Surbiton,  fortunately the impact was less this year than is often the case.

Dr Close noted in respect of the other leading national gold producers, that according to the China Gold Association, Chinese gold production in the March 2021 quarter totalled only 74.44 tonnes. This was only about 5,000 ounces more than Australia’s production. The quarter’s output in China was reported to be some nine per cent less than a year earlier, due to dislocations caused by the COVID-19 epidemic and by tightening environmental regulations.  The latter have negatively impacted Chinese gold output for several years now and have led to Chinese production falling, while that in several other top producing nations - notably in Australia and Russia - has been trending higher.

Russian gold output is also reported as having fallen by around 4% in Q1 with the nation’s gold mines being affected by COVID-19 control measures and by seasonal factors.  However, in our opinion Russia has the better chance of taking the global No.1 gold production slot than Australia, but probably not until towards the end of the decade, when it brings production on stream from the massive Sukhoi Log deposit – probably the world’s largest undeveloped gold resource.  Australia is primarily a producer from smaller deposits and we are not aware of any mega-deposit yet to be developed in the sub Continent.

“While the majority of local operations treated less ore in the latest three-month period, overall the fact that the gold price remained favourable assisted many producers’ bottom lines,” Dr Close said. “The first quarter’s production was worth some A$5.5 billion at the average gold price for the period.”

 “Chinese production figures need to be treated with caution,” Dr Close also commented. “Australia may even be on the way to overtaking China as the world’s largest gold producer but it is far too early to draw any real conclusions.”  She also warned that, production figures from Russia (the other main contender for the world No.1 gold producer crown also need to be treated with caution.  Various sources give different figures for Russian gold output and also it appears that recycled gold from scrap is sometimes added to mine production, thereby boosting the total output figure.

 In Q1 in Australia “Just Fosterville, Tropicana and Boddington together accounted for a reduction in output of 116,000 ounces, or 3.6 tonnes of gold, which was more than one third of the total reduction for the March 2021 quarter, “Dr Close said.   There were however some small increases as new small mines came on stream including Novo Resources’ Beaton’s Creek, Tribune and Rand’s share of production from the East Kundana joint venture and Ora Banda’s new mine at Davyhurst near Kalgoorlie.  Newcrest’s Telfer operation also increased output in Q1.

 “Novo and Ora Banda will increase output as they ramp up to full capacity over the next few months”, Dr Close said. “Also, Capricorn Metals’ Karlawinda is due to start up mid-year and Wiluna Mines’ expansion project is underway.”

 “Thanks to higher gold prices in the last couple of years, the gold sector has continued to raise considerable capital and there is a tremendous amount of exploration going on, with excellent results being reported,” Dr Close said. “The chances of Australia’s gold output declining sharply in the next few years is unlikely.”

Australia’s largest gold producers for the March 2021 quarter were:

Cadia East, 179,546 oz (Newcrest)

Boddington, 152,000 oz  (Newmont)

Tanami, 117,000 oz (Newmont)

Kalgoorlie Super Pit, 111,278 oz (Northern Star)

Fosterville, 108,679 oz (Kirkland Lake Gold)

01 Jun 2021

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