Australia is the world’s second-largest gold producer, with only China having a higher output each year. Russia is close behind, although despite ramping up gold production in 2013-14, the country failed to clinch the second spot.
According to new statistics from Australia’s Bureau of Resources and Energy Economics (BREE), Australia’s performance has persevered and maintained its spot in spite of a “turbulent time” for the country’s gold industry.
Prices plummeted 28 per cent in 2013, which had an immediate impact on Australia’s gold producers. In fact, many were forced to re-evaluate their existing mines and consider productivity improvements and reductions in expenses.
“A number of higher-cost mines were placed on care and maintenance, while others were sold to new owners,” BREE’s Resources and Energy Quarterly report stated.
“Although a challenging year, the upside of 2013-14 has been the increase in production from new mines starting up.”
These included the Cadia East mine in NSW and Western Australia’s Tropicana and Andy Well mines. Elsewhere, some producers also claimed existing mines were enjoying higher output and enhanced performance.
BREE estimates that gold production has climbed 7.5 per cent to 274 tonnes this financial year, although exploration figures were down 34 per cent year on year. Due to a predicted drop in gold prices, exploration performance is not expected to improve in 2014-15, even if low prices result in more people buying gold.
Looking ahead
Despite a solid performance in 2013-14, the market for producers is expected to tighten over the next year. As values slump, high-cost companies will be particularly hard hit, and BREE noted that many of these organisations have already exhausted easy cost-cutting measures.
“Investment in new gold projects in Australia has already dried up in the past year; this trend is not expected to reverse during a period of lower prices and accessing finance for new projects will be increasingly difficult, especially for aspiring new producers,” BREE commented.
However, there is likely to be opportunities in brownfield development initiatives and other schemes that aim to optimise operating efficiency.
Yet, despite these challenges, gold production is still expected to advance over the next five years – albeit at a slower rate than previously. BREE forecasts suggest an annual growth of approximately 1 per cent until 2018-19.
Gold exports will improve by a similar amount, with data showing values will climb around 1.7 per cent a year over the same time period. This means gold shipped to other countries will be worth $14.7 billion.
A number of factors are expected to help export prices improve, including a lower Australian dollar, a rebound in gold prices and increased volumes. Trade with China is also set to have an impact, following a surge in exports recently.
In 2013-14, Australian gold exports to China jumped 46 per cent compared with the previous fiscal period. Overall, exports to the Asian nation have rocketed 1,173 per cent over a three-year period.
China’s share of Australian gold has climbed from just 5 per cent in 2010-11 to nearly two-thirds this year.
How do you think Australia’s gold production and exploration will affect investors? Does a drop in supply indicate potential price rises? Please tell us what you think.
