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Gold price up, production down

Kate Haycock
Monday, 24 November 2008

EVEN as the gold price stages a rally, Australian miners look set to record their lowest year of gold production since 1989, according to gold analysts Surbiton Associates.



Melbourne-based Surbiton said during the September quarter Australian gold miners produced 56 tonnes – the third lowest production rate in the last 20 years, down by 5t or 9% from the same time in 2007.

For the full-year, miners look set to produce some 30% less than in the peak year of 1997.

The less-than-glittering production rate comes despite the value of gold increasing steadily this year.

The average Australian dollar gold price for September was around $1000 an ounce and in early October the falling Australian dollar saw the gold price rise to $1400/oz.

Despite this, the quarter saw two more gold companies fall into administration – Toronto-listed GBS Gold Australia and London-listed Mercator Gold – joining Monarch Gold Mining, View Resources and Crescent Gold as companies unable to make cash from their gold mining operations.

Surbiton director Sandra Close said companies that were trying to redevelop old mines were suffering, as were those at the high end of the cost curve, with explorers also facing tough times thanks to the financial crisis.

Even as exploration becomes harder to finance, the gold price has jumped overnight and again this morning, with spot gold last trading at $US801.70/oz.

At the end of October, the price had slumped to a 2008 low of $721/oz.

The precious metal – which has confounded expectations of a rally on the gloomy economic situation by staying firmly under $800 for several months – was boosted by the firmer oil price and by the US dollar falling against the Euro.

Gold demand in India and the Middle East is also reportedly picking up as “wedding season” arrives.

The rise brings the gold price to $A1270 at the current exchange rate of US63c buying $A1.

The rally has boosted gold stocks on the Australian bourse, with Newcrest Mining jumping 13% to $24.25, a $2.79 jump, while Lihir Gold zoomed up 18% to $2.13.

Sino Gold Mining was up 34c or nearly 13% to $3.02, while the Australian listing of AngloGold Ashanti jumped $1.74 to $5.99, a 41% leap.

Smaller gold miner Focus Mineral rose 0.1c to 1.8c, a 6% gain, while Avoca Resources was up 9% to $1.425