Australia’s 2015 gold production rises and may still continue to do so

Most of the world’s principal precious metals consultancies had been predicting an increase in gold production in 2015, despite the lower US dollar gold price – and contrary to the views of a number of commentators.  In the event, as 2015 figures begin to come in it looks as though we will indeed see a small increase, although now the top analysts do see things beginning to turn down.   Chinese output is stuttering, but other countries where the local gold price has been high in domestic currency terms have even seen improving margins for gold miners and in some gold is trading at an all-time high in local currency terms.  This has meant that what many analysts had predicted as marginal, or lossmaking, mines at the lower U.S. gold price are actually nothing of the sort in domestic currency terms.  See: Ill wind. Gold price falls in USD but still positive for many nations and Gold price at all-time high in some major gold mining nations – the latter published here back in January,

Take Australia, the world’s No. 2 gold producer after China, for example.  Figures compiled by Australian consultancy, Surbiton Associates, show that the country’s gold output last year hit a 12-year high at 285 tonnes.  Q4 production was 73 tonnes, marginally up on the Q3 figure. This is higher than the GFMS consultancy’s recent estimates – but then then Surbiton Associates’ 2014 figure at 282 tonnes was also higher.  See below:

Top 10 Gold Producing Nations (tonnes) – 2015 (Estimated) (GFMS)

Rank Country 2014 2015 E Change YOY
1. China 447.8 456.5 +2%
2. Australia 274.0 277.0 +1%
3. Russia 262.2 256.7 -2%
4. USA 209.2 213.8 +2%
5. Peru 173.0 173.3 0%
6. Canada 151.2 152.1 +1%
7. South Africa 163.7 148.9 -9%
8. Indonesia 116.4 133.6 +15%
9. Mexico 117.8 123.4 +5%
10. Ghana 107.4 94.5 -12%
Rest of World 1096.7 1096.3 0%
Global Total 3119.4 3126.2 0%

Source: GFMS, Thomson Reuters

Indeed the Australian gold sector – even before the recent upturn in prices – had very much been bucking the dismal resource sector trend despite the very negative sentiment see in U.S. markets.  As Surbiton director Dr. Sandra Close points out “Once again the local gold sector has benefited from weaker exchange rates against the U.S. dollar.”  Indeed, although over 2015 the US dollar gold price slowly declined to around US$1,050 per ounce near year end, by contrast the Australian dollar gold price remained relatively stable during the year, averaging A$1,540 per ounce, while since January it has risen to over A$1,700 per ounce.

“The Australian dollar has fallen from near 95 US cents in mid-2014, to around 82 US cents at the start of 2015, to around 72 cents by end 2015,” said Dr Close. “Such a significant devaluation has provided quite a boost to the Australian gold sector, as well as to other exporters.”

“I wonder if investors are aware that the Australian dollar gold price, at around A$1,700 per ounce, is only about A$100 per ounce less than the all-time record Australian dollar gold price reached in August 2011,” Dr Close said.

Lower oil and gas prices have reduced the cost of energy in both the mining and processing phases of the industry and that the end of the “mining boom” has reduced pressure on wages and led to lower contract rates for mining and ore haulage.  Factoring in a high local currency gold price together with some lower input prices and tighter cost containment this has seen an increase in overall margins for the Australian gold mining sector overall. “Much of the local gold sector is travelling quite well for the moment.” said Dr. Close

She also noted that there had been recent overseas commentary that Australian gold producers were being squeezed by high costs.

“Such comments are typical of US-centric observers who fail to appreciate the effect of weaker local currencies on the economics of gold production, whether in Australia or in other gold producing countries outside the US,” she said.  Indeed most of the world’s major gold producers have seen sharp falls in their domestic currencies against the U.S. dollar.

Dr Close said a number of mothballed operations were currently being brought back into production which should help boost Australian gold output in the near future. In addition, there was increasing toll treatment of ore by small companies.

Surbiton notes that Australia’s largest gold mines by production for the 2015 year were dominated by the gold majors – Newmont, Barrick, AngloGold and Newcrest:

Operation Ounces Owner
Boddington 794,000 Newmont Mining Corp
Super Pit – JV 640,000 Newmont Mining Corp 50%, Barrick Gold Corp 50%
Cadia East 508,303 Newcrest Mining Ltd
Tropicana – JV 488,939 AngloGold 70%, Independence Group 30%
Telfer 488,817 Newcrest Mining Ltd

The above article is an edited version of one published yesterday on one of the best sources for links to news and comment on precious metals on the web and which also publishes original comment written by its own staff.