Poor weather in the eastern states has failed to deny a small increase in Australian gold output during the September quarter, according to gold mining consultants Surbiton Associates.
Gold output rose by one tonne (two per cent) to 75 tonnes during the three-month period against the June quarter. Production was about two tonnes (three per cent) higher than the September 2015 quarter.
Surbiton director Sandra Close said the lift in production was a good outcome considering wet weather took its toll on gold producers in New South Wales, Victoria and South Australia.
“Overall, local producers have continued to take advantage of the higher Australian dollar gold prices that have prevailed for much of 2016,” Close said.
Gold prices spiked to almost US$1340 ($1760) an ounce in the lead-up to the US presidential election earlier this month. This followed gold prices reaching an Australia dollar record of more than $1830 an ounce in June after the Brexit vote.
“Although the prevailing local gold price is considerably below these peaks, it has still been pretty encouraging,” Close said. “So far, throughout much of 2016, gold has traded in Australian dollar terms mostly between $1600 and $1800 per ounce and averaged near $1700 per ounce.”
Close said the various “hedging” mechanisms that had attracted criticism when gold prices were rising between 2003-2011 had come back into favour, with the two recent peaks providing producers with brief opportunities to lock-in gold sales at attractive prices.
“Hedging, by forward sales mechanisms or the use of put options, is a legitimate method of reducing risk, locking in higher prices and guaranteeing future cash flows,” Close said.
So far, throughout much of 2016, gold has traded in Australian dollar terms mostly between $1600 and $1800 per ounce and averaged near $1700 per ounce.
“Rather than being a form of speculation it is simply risk management. Failing to lock in future prices is tantamount to speculating that future gold prices will be higher than they are at present.”
Newmont Mining’s Boddington gold mine in Western Australia was the leading producer of the precious metal with 220,000 ounces in the three months to September. The Cadia East mine in NSW, owned by Newcrest Mining, was second with 195,301 ounces.
Kalgoorlie’s Super Pit gold mine, a joint venture between Newmont and Barrick Gold, was third with 190,000 ounces. Close said recent reports that China’s Minjar Gold could buy the Barrick’s 50 per cent stake in the operation for US$1.3 billion would have no effect on overall control of Australia’s gold industry.
“If the proposed deal is successful, Barrick’s sale of its 50 percent share of the Super Pit would involve the ownership going from one overseas company to another overseas company,” Close explained. “Thus, overseas control of the local gold industry would remain at around its current level of 49 per cent.”