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Australia gold output rises on higher grades

Australia gold output rises on higher grades

Photo by Reuters

1st September 2014

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Australia’s gold production increased by 9%, or 24 t, during 2013/14, compared with the previous year, to 282 000 t, mining consultants Surbiton Associates revealed this week.

At the current spot price, Australia’s gold production was worth an estimated A$12.5-billion.

Gold production for the three months to June also improved, with 71 t, or 2.3-million ounces, produced during the quarter, compared with the 68 t produced in the previous quarter, and the 67 t produced in the previous corresponding period.

However, Surbiton director Dr Sandra Close warned that observers should not be fooled by the higher gold output.

“While some new operations have opened, others have closed, so the majority of the rise is due to an overall increase in ore grades, as the industry responds to harder times,” Close said.

The most significant new producer to join the ranks in 2013/14 was the Tropicana project, in Western Australia, which is jointly owned by AngloGold Ashanti and Independence Group. The project alone accounted for 10 t of output in the last three quarters.

“Many gold producers are treating higher grade ore in order to protect their margins, in response to lower prices in much of 2013 and 2014,” Close said.

“While this has led to higher overall gold production, it means lower-grade material is left in the ground or stockpiled, so that over time reserves are reduced and mine lives are shortened.”

She said that some operations were better placed than others to adjust their grades and their mining schedules in light of the lower prices.

Besides Tropicana, new operations in 2013/14 included Doray Minerals’ Andy Well and Regis Resources’ Rosemont, both in Western Australia and Alkane Resources’ Tomingley project, in New South Wales.

Close pointed out that other operations had ceased production during the year, so overall there was little change in the total amount of ore treated.

Among the closures were Norseman Gold’s operations at Norseman, also in Western Australia, which had been in continuous production for more than 70 years.

Others operations which ceased production included Apex Minerals’ Wiluna mine, Focus Minerals’ operations at Coolgardie and Laverton and Silver Lake’s Murchison operation, all in Western Australia.

Although Newcrest Mining’s Cadia Hill in New South Wales ceased production, its production was replaced by the Cadia East operation.

“The higher gold grades being treated and resultant higher output are indicative of an industry doing its best to cope with lower prices. Most operations will survive but others, which cannot cut costs or increase grade, will not be sustainable,” Close noted.

Western Australia produces over two-thirds of Australia’s gold and Close this week urged the state government to be cautious in its deliberations regarding any increase in royalty rates, citing the decline in mineral exploration as further evidence of the downturn in the minerals industry.

“Exploration expenditure is a useful barometer to gauge the health of the mining industry. When times get tough, spending on exploration is one of the first things to be cut.”

Information from the Australian Bureau of Statistics (ABS) indicated that in the nine months to March, total mineral exploration expenditure in Western Australia fell 34%, compared to the previous corresponding period. Spending on exploration for gold in Western Australia for the same period fell by 37%.

“ABS’ numbers for the March 2014 quarter alone, the latest available, are even worse. Spending on exploration for gold in Western Australia fell 50% compared to a year earlier,” Close noted.

The Western Australian state government was currently undertaking a royalty review, which was expected to be completed by the end of 2014.

In its 2015/16 state budget, the Western Australian government announced that royalty income would account for over 25% of the government’s revenue in 2017/18, up from only 5% in 2003/4. By 2015/16, an additional A$560-million would be added to the royalty revenue.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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