LAWRIE WILLIAMS: World top 20 gold mining nations 2018 - Peak gold remains elusive

Now is the time of year that the major independent precious metals consultants start to publish their annual assessments of the global gold sector,  First out of the blocks this year is London-based consultancy, Metals Focus (which also supplies much of the data for the World Gold Council’s analyses), which launched its 2019 Gold Focus publication today in Singapore.  There will be a London presentation on April 2^nd.

Some regional consultancies like Surbiton Associates in Australia have already come up with their figure as they have a much smaller universe to follow, but it is always interesting to compare the global consultancies’ assessment with the more focused local ones. In the case of Surbiton’s estimate of Australia’s 2018 gold output, the Metals Focus estimate tallies quite well – see:  Whither peak gold? Australian 2018 output at new record, but falls short, in Russia’s case of the production figure put forward by that nation’s Finance Ministry which puts Russian gold output far closer to that of Australia – see: Russia closing gap on China as World No.1 gold miner?.  Certainly should the Chinese output falls continue at the current rate and Australia and/or Russia’s output continue to grow at current levels, either, or both, could surpass China as the world’ No.1 gold producer inside around three years!

Table: Top 20 Gold Producing Nations 2017/2018 (Tonnes)

Source: Metals Focus, lawrieongold

What will continue to attract comment from analysts dwelling on the above figures is the ever-continuing distance away of ‘peak gold’ which we have been told by some  has already been visited upon us.  Assuming the Metals Focus figures are accurate this is still not the case with global gold output continuing to increase, albeit at a low rate.  We expect the competing analyses from the other major independent precious metals consultancies – notably GFMS, also in London and the CPM Group in New York – to confirm this situation.  There is arguably still sufficient new production in the pipeline to keep output growing at this kind of level for a couple of years yet.

However the downturn in exploration activity over the past few years, together with the lack of finding of major new gold deposits globally and the low desire of bankers and other money sources to fund multi-billion dollar projects will catch up sooner rather than later.  Even a huge surge in the gold price, which we see as unlikely anyway, would probably not see an increase in output for a number of years given the lead time for permitting and constructing a new mine development almost anywhere in the world.  As to the current year Metals Focus is predicting further gold output growth - but only in the order of 0.4%.  It sees rising output from West Africa, Canada and Russia but reckons this is likely to be largely offset by lower production volumes from China and Indonesia.  To this we’d add possible production rises in Australia and perhaps a further fall in South African gold mine production.

What also will be attracting attention is the growth and/or shrinkage in output on a country by country basis.  We have already commented on falling output in the world’s no. 1 producer, China, and rising production from the world’s No 2 and 3 gold miners, Australia and Russia, but perhaps the ever continuing fall in output from South Africa is the main stand-out here.  For most of the 20^th Century South Africa was the world’s largest gold producer by a huge margin.  Now, according to the latest Metals Focus figures, the country is not even the largest producer in Africa, having fallen below Ghana in the above table.  As grades have fallen, reserves have been depleted and the mines have become deeper to the extent it is increasingly difficult for the mining companies to produce gold profitably,  Were it not for the huge employment numbers at the country’s bigger mines and the adverse political impact of closures, we suspect they may have been run down even faster.  South Africa has now fallen to ninth place among the world’s gold producers and we would not be surprised to see it fall even further down the table in the next few years.

The biggest gainer in tonnage terms was Indonesia, but this was entirely down to one mine- Freeport McMoran’s Grasberg operation, which is primarily a copper mine, but was also the world’s largest gold mine in production terms last year.  There was a huge lift in gold output in 2018 as the country’s 22.8 tonne increase in gold production included an additional 35.6 tonnes from Grasberg due to higher ore grades processed from the final stage of the open pit.  This level of output is probably not sustainable – hence the earlier suggestion that the current year may see a reduction in Indonesia’s 2019 gold production.

Kazakhstan, Mali and the Democratic Republic of Congo also all saw plus 20% new mined gold production increases last year due to some big new mine openings and ramp-ups.

On price forecasts we will no doubt learn more at the London presentation tomorrow, but overall Metals Focus is positive on the likely price performance this year with Nicos Kavalis, a director of the consultancy, predicting that the price may well near $1,400 by the end of the year.  There is much going in gold’s favour - notably the U.S. Fed dropping completely its earlier forecast of 3 to 4 interest rate rises this year while geopolitical uncertainties are also working to gold’s advantage.  But it also warn s of headwinds - notably the likelihood that the dollar will remain stronger than most competin g currencies which is likely to limit any gold uptick.

01 Apr 2019 | Categories: Gold

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