Australia’s gold output has hit its highest level in 11 years.
The production of gold rose by four per cent in 2014 to 284 tonnes, its highest level since 2003.
According to Sandra Close, director of mining consultancy firm Surbiton and Associates, lower prices forced Australian gold miners to increase the grade of ore they were targeting and push their processing plants even harder.
However, Close warned there was a downside to producing gold in this manner.
"Superficially, the figures give the impression of a healthy and vibrant industry but you need to dig a little deeper to get the whole picture. It’s not all good news," Close said.
"Higher grades and greater throughput certainly lift production but lower grade material becomes uneconomic, so mine lives are shortened."
Close said the high level of unemployment in the gold sector and the “waste of trained people” was also cause for concern, with the proposed gold royalty hike in WA set to make matters worse.
A final WA state government report on royalties is expected to be released soon.
The current royalty rate is 2.5 per cent, with any increase set to cause an industry-wide backlash.
Gold miners have lobbied against royalty hikes, saying that there are many small producers that could not afford additional expense on marginal profit ratios.
In the last 12 months the gold spot price has dropped from US$1382 down to around US$1215 per ounce.
The Bureau of Resources and Energy Economics predicts that gold’s export value will decrease 2.7 per cent in 2015 to $12.7 billion with higher volumes and more favourable Australian dollar exchange rate being more than offset by lower world gold prices.