LAWRIE WILLIAMS: World Top 20 Gold producing nations in 2017 – not peak gold yet!

London-based precious metals consultancy, Metals Focus, released its 100 pages plus annual analysis of World Gold Supply and Demand today, and, as usual the publication contained a huge wealth of information on the subject – more than sufficient for the serious gold analyst to spend several days digesting.  Overall, the consultancy is looking to further growth in the gold price this year and affirms that peak gold is not yet with us, and may not even be in the current year as it sees global gold production continuing to grow overall, albeit at a pretty minimal rate.

While its analysis suggests that total gold supply in 2017 may have fallen compared with the previous year – 4,458 tonnes against 4,599 tonnes in 2016. This was due almost entirely to an estimated fall in recycling volumes, whereas global new mined production continued to rise, albeit  at a tiny 0.5% year on year.  Significant tonnage falls in China, South Africa, Ghana and Mexico among the world’s top 10 producing nations were slightly more than countered by sharp rises in Russian, U.S. and Canadian output.

Top 20 Gold Producing Nations 2016/2017 (Tonnes)

Source: Metals Focus

Perhaps the above should not yet be considered definitive final figures, which may be why Metals Focus has rounded them off this year, as several nations’ 2016 figures show some quite substantial adjustments from the consultancy’s figures published at this time last year. Further, official figures from the country’s Finance Ministry put Russia as having overtaken Australian gold production in 2017, but may have been calculated differently.  Overall the above estimates are probably as good a guide as any to the rankings of global gold producing nations in 2017 as available at this time of year.

Looking at the rises and falls the decline in Chinese production in 2017 is by far the most significant in tonnage terms and is in part, at least, due to stricter environmental regulations being imposed on the mining companies – particularly with respect to cyanide in tailings.  Metals Focus suggests these more stringent regulations could take another bite out of Chinese production in the current year.  What does remain unknown here is that reduced domestic production, coupled with a maintenance of strongish demand, could well lead to even more enhanced gold flows into China from the West.  Gold export figures for the metal going into China will thus need to be watched carefully this year.

South Africa continued to see its gold production eroded as its mines get older and deeper, while Tanzania’s decline was something of a self-inflicted wound and the mining companies will be hoping that Tanania’s harsher treatment of Western mining companies it sees as over-exploiting its wealth and with accusations of fiddling the books won’t spread to other African jurisdictions.  Ghana, Mali, Burkina Faso, Liberia and Cote d’Ivoire are having an increasingly strong impact in terms of African, and global, gold production.  Indeed these are all nations seeing growth in gold output.

As for ‘peak gold’, in spite of potentially falling production in China, Metals Focus analysts note that at $1,300 gold most mining companies are decently profitable – a point also made recently by one of the smartest gold aficionados, Pierre Lassonde, co-founder of top gold royalty company Franco Nevada.  While rising cost pressures are also beginning to impact the gold miners, one result has been mining to higher grades, and there may even have been something of a pick-up in gold exploration – both of which could lead to global gold production levels being maintained.  The fact too that what exploration that has been carried out by the majors has been focused increasingly on brownfield sites (i.e. those close to existing mines) and this can lead to small output extensions for existing projects thus avoiding the long time delays involved in permitting, and bringing on stream brand new greenfield mining projects.  This process could well keep global gold production at current levels for a couple more years yet – particularly if the gold price continues to rise even gradually.  There may well be no big new mega projects in the pipeline, but a plethora of small increases could keep production flowing.

As to the prospects for the gold price this year and ahead, Metals Focus remains positive and on a best case scenario predicts gold could reach $1,450 by Q4.  Speakers at the launch of the new report see interest rates remaining at or near negative real levels in the major economies for the next year or two.

But $1,450 gold is all very well, but it is priced thus in US dollars and one of the reasons that the consultancy is predicting an increased price is that it sees a continuing decline in the dollar in the short to medium term.  This means the price in currencies which outperform the dollar may not be quite so positive.

There is much more data to draw on in the Metals Focus report, and rival consultancy GFMS is also due to release its similar analytical publication shortly.  One suspects the analyses and conclusions will be somewhat similar given that Metals Focus was set up by a breakaway group from GFMS following the latter’s takeover by Thomson Reuters a few years ago now.

04 Apr 2018 | Categories: Gold, Mining

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