LAWRIE WILLIAMS: Is Russia already the world’s No. 2 gold producer and on way to No. 1?
According to some claims, Russia is already the world’s No. 2 gold producer, having moved ahead of Australia in 2019, although perhaps not yet according to independent precious metals consultancies Metals Focus and GFMS. But, according to the latest figures from the Union of Russian Gold Producers (URGP), Russia could shortly rival China for the world No. 1 spot if Russian production growth continues at the current rate and Chinese gold output continues to fall.
According to the URGP, Russia produced 330 tonnes of gold last year – for comparison Metals Focus puts the 2018 figure at 297 tonnes and China’s output at 404 tonnes (down almost 6% on the 2017 figure while it put Australia’s 2018 gold production at 315 tonnes. However Australian specialist gold consultancy, Melbourne-based Surbiton Associates calculated Australia’s 2018 gold output at a slightly higher 317 tonnes, so there are discrepancies in the various estimates.
If we take the URGP figures, Russia was already the world’s second largest gold producer in 2018 and it reckons that production in the first 9 months of the current year was 11% higher than in 2018. If this growth level is maintained in the final quarter that would put 2019 gold output at around 366 tonnes, although the UGRP is currently talking of 2019 full year production of 350 tonnes. This may prove to be a conservative estimate given the group points to increased output from existing mines, plus new production at Polyus Gold’s Natalkinsky operation in the Magadan region and Nordgold’s Gross mine in Yakutia, both of which were ramping up to full production in the current year.
Australian gold production probably peaked last 2018/19 fiscal year (most Australian companies have June year ends) at 321 tonnes, but the miners may not quite have maintained that level in calendar 2019 due to higher gold prices leading to lower grades being processed at some mines, and bad weather in Q3 which adversely affected some other properties. We are not sure if the serious bush fires raging across parts of the country may also be affecting some mines.
The recent falls in China’s gold output have primarily been due to the imposition of stricter environmental standards on the mining operations. If we assume a further 6% fall again this year that would bring national gold production down to around 380 tonnes – not very much higher than the estimate for Russian output based on the URGP figures. Continuation of these production trends would see Russia surpass China as the world’s No. 1 gold producer in 2020.
Both Russia and China, in addition to being top gold miners, have also been building up their central bank gold reserves. Thus both seem to see the yellow metal as playing perhaps an increasingly important role in the future for global finance. It also may help protect their respective economies from what they probably regard as increasingly aggressive moves by the U.S. administration to weaponise the dollar’s dominance as the moist accepted global reserve currency.
20 Dec 2019