JOHANNESBURG (miningweekly.com) – The Australian gold sector has proved to be the outstanding performer in the local resources industry in the first half of 2016, Melbourne-based specialist mining consultants Surbiton Associates said at the Diggers and Dealers Forum, in Kalgoorlie, on Monday.

Gold output for 2015 totalled 285 t, or 9.2-million ounces, which was worth more than A$14-billion at the average spot price for the year of some A$1 540/oz, although since the start of the current year, the Australian dollar gold price has risen further.

“The average spot price for the first half of 2016 was A$1 665/oz, 8% higher than last year’s average price,” said Surbiton Associates director Dr Sandra Close. “So far this year the gold price has generally trended upwards and is now nearing A$1 800/oz. With producers still keeping a tight rein on costs, such prices are providing a real boost.”

As world markets experienced uncertainty due to the Brexit vote, the Australian dollar gold price peaked briefly to an all-time record high of over A$1 850/oz on June 24, owing to a rise in the US dollar gold price combined with a weaker Australian dollar.

“Lately we have seen more producers locking in attractive prices and ensuring some excellent margins, by taking advantage of peaks in the local price and hedging part of their output,” Close said. “Output is remaining strong for the moment too, as producers ‘make hay while the sun shines,’ reduce their debt and pay some dividends.”

However, she said that if the price remained high producers might well begin to treat slightly lower grade material, to prolong the life of their operations and better use their resource, while still maintaining reasonable margins.

“Gold shares have once again caught the market’s attention,” Close said. “Prices of some of the ASX-listed producers have risen substantially, as gold has come back into favour, by virtue of higher gold prices plus gold’s traditional role as a store of wealth in uncertain times.”

She said that since the beginning of 2016, Saracen’s share price has almost tripled, the share prices of St Barbara and Evolution had more than doubled; and Newcrest’s share price had almost doubled.

Close said that while the gold sector was travelling better than most at the moment, the local minerals and energy industries were still well and truly in business too, despite what many people thought, and resources remained by far Australia’s greatest export earner.

“The latest government figures available show that for the 2014/15 financial year resources and energy exports, at A$172-billion, were just over four times greater than total agricultural exports of A$42-billion,” Close said. “It’s a long time since we rode on the sheep’s back – these days we well and truly ride on the back of giant yellow trucks and in big bulk carriers.”

She said that on a yearly basis the value of iron-ore exports alone, at about A$50-billion, was greater than the total of all agricultural exports, while the values of the next four largest single exports - coking coal, liquefied natural gas, thermal coal and gold - were between A$15-billion and A$20-billion for each commodity.

“The resources industry has undergone many changes in the 25 years since the first Diggers and Dealers Forum,” Close said. “I sometimes wonder how many Australians really appreciate the huge expansion the minerals and energy sectors have undergone in that time and how much they have contributed to our economy and our standard of living. Where would we be without them?”