Jun 01, 2020

Gold output drops as miners ride price wave

Gold output drops as miners ride price wave

Australian gold production fell 12 per cent in the March quarter, according to the latest industry report by Surbiton Associates.

But they say the 10-tonne drop in output from late 2019 is no cause for alarm, reflecting a move by operators to treat their lower grade ore while supported by record Australian dollar gold prices.

Production in the March quarter declined to 77 tonnes of gold from 87 tonnes in the December quarter – which was the highest quarterly output ever.

At current prices 10 tonnes of gold is worth more than $800 million.

“It is no great surprise that the March quarter 2020 gold production is down,” Surbiton Associates director Sandra Close said.

“I think record Australian dollar gold prices were a significant contributing factor.

“Many operators are now taking advantage of the extraordinary rise in Australian dollar gold prices through 2019 and early 2020.

“The March quarter 2020 saw a sector-wide reduction in both grade treated and tonnes treated, compared with the previous quarter and also there was one less day in the period.”

She said that at times of prolonged high gold prices, many operations reduced the head grade of the ore being treated where possible.

This still yields good profits because of the higher prices but the amount of gold produced actually falls.

“The Australian dollar gold price averaged A$1,831 per ounce for the March quarter 2019 and A$2,410 per ounce for the March quarter 2020, a rise of over 30 per cent,” Dr Close said.

“The US dollar price has also risen over the same period but only by around 21 per cent by comparison, as the Australian dollar price has had the added benefit of a lower exchange rate.

“We saw the same effect of prolonged higher prices reducing production when the Australian dollar gold price rose substantially over several years, to reach more than A$1,500 per ounce in 2011 and 2012. Although at that time the Australian dollar and US dollar were around parity.”

In the latest quarter operations recording lower production outnumbered those increasing output by almost four to one.

Among the few reporting higher gold output were Evolution Mining’s Mount operation in Queensland – up 4200 ounces.

Dr Close said that the COVID-19 pandemic had had minimal effect on gold production so far.

“The gold mining industry and the mining industry in general have handled the problems associated with the coronavirus threat very well,” Dr Close said.

“Some operators have re-organised rosters and some fly in-fly out employees are working for extended tours of duty, in order to reduce the movement of personnel.

“In some cases, workers from other states have moved to Western Australia to overcome the problem of state border closures.”

Australia’s top five gold producers for the March quarter 2020 were:

Cadia East195,181Newcrest Mining Ltd
Fosterville158,864Kirkland Lake Gold Ltd
Boddington142,000Newmont Goldcorp Corp
SuperPit117,127Northern Star Resources Ltd 50%, Saracen Mineral Holdings Ltd 50%
Tanami116,000Newmont Goldcorp Corp