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China is currently #1 producer.
GOLD ANALYSIS
CHINA LARGEST PRODUCER
2007 world gold production fell marginally and 2008 output to stabilise - GFMS
Gold mine production down for the second successive year - set to remain stable in 2008 as miners build for the future.
Author: Rhona O’Connell
Posted: Wednesday , 09 Apr 2008
LONDON -
GFMS, the leading precious metals consultancy, has released its annual review of the gold market, Gold Survey 2008. The research into the mining sector records global gold mine production at an eleven-year low last year, after the second consecutive year of decline. Gold production last year dropped only fractionally, by ten tonnes or 0.4% compared with 2006 to 2,476 tonnes. Weighted cash costs (discussed further below) rose by $78/ounce, and total production costs were up by $99/ounce.
Among the highlights of a comprehensive analysis of the sector are the following points.
The world's largest producer was Barrick Gold at 250.7 tonnes, followed by AngloGold Ashanti with 170.4 tonnes and Newmont Mining with 165.6 tonnes.
South Africa was no longer the world's leading gold producing country, having been overtaken by China. the GFMS archive shows that South Africa had been, until last year, the leading producer since 1905.
Production levels were hampered not only by a lack of new mine capacity coming on stream, but also a temporary slip in productivity. This was due to a large number of major operations scaling back in favour of mine development and stripping activity and this was probably one of the most important themes running through the industry during the year as the mining industry took advantage of a period of healthy cash margins in order to invest for the future.
The region with the strongest performance was Asia, which increased its production from 531 tonnes to 597 tonnes, an increase of almost 66 tonnes, driven by increased production from China, Indonesia, Papua New Guinea and the Philippines. China, at 280.5 tonnes, increased its output by 33 tonnes and thus was the world's largest producer for the first time, accounting for just over 11% of the world total. China is expected to consolidate its lead in 2008, "primarily", according to GFMS' Executive Chairman Philip Klapwijk, "as a result of further declines expected in South Africa due to its ongoing power supply issues".
Indonesian production remains largely dependent on Freeport McMoRan's Grasberg mine, where production rates have regularly gone through dramatic shifts. In the first half of 2007, production was up significantly on the first half of 2006, which had been reduced by virtue of lower grade ore extraction and waste stripping activities. GFMS' research also suggests that, similar to effects seen in West Africa, extreme weather conditions in Indonesia's Kalimantan province in the third quarter hampered gold output in the area, although this was contained primarily to the informal sector.
The 26 tonnes loss in South Africa was exacerbated by safety-related closures in the fourth quarter and contributed to a decline of 29 tonnes in the Continent as a whole, despite increases in Ghana and Guinea. This was the largest regional loss for the year.
Declines in North America (the seventh consecutive year) were almost exclusively in the United States where the country's two largest operations; Barrick's Goldstrike and Newmont's consolidated Nevada operations, recorded a combined drop in output of twelve tonnes. The temporary suspension of one of the Newmont operations (Midas) was lifted in October, and production here is expected to achieve design levels in the first half of this year.
Production in Latin America was down by almost 23 tonnes. Despite strong gains in Brazil, Mexico and Guatemala, a 32 tonne fall in Peru was driven by lower output from the giant Yanacocha mine; as mining depth increased, declining ore grades and an increase in the stripping ratios resulted in a 40% decline in output. Recovery is due to improve by mid-2008 as pre-commissioning is already underway at the new Gold Mill project on the mine for the treatment of complex ores.
Elsewhere production declined modestly in the CIS, driven primarily by a fall in Russian output, while Australia was broadly steady.
Average production costs increased by a steep 25% from 2006 levels (with the largest rises recorded in Australia with a US$91/ounce increase in cash costs. In North America cash cost inflation remained below the global average). This was again driven in part by high costs associated with labour, plant and consumables. It was also, however, partly a function of the increase in price as it meant that a number of miners took advantage of their increased margins in order to undertake development work. - itself a key contributory factor to the reduction in mine production last year. Even so, the rising gold price meant that miners' simple cash margins widened by $13/ounce.
Output is expected to remain stable in 2008
