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Global Gold mining stay unchanged during 2016

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LONDON (Scrap Register): Mined gold totalled 3,236 a tom in 2016, virtually unchanged from 2015. Global production peaked in Q3, when 850.4t was brought on to the market, before falling back to 810.9t in Q4 (2% yoy), the World Gold Council said in a report.

Indonesia saw the largest gains in Q4 (more than 7t yoy). This was due to the mining of higher grade ore – something of a current industry trend – at Grasberg, which promises to boost Indonesian production further in 2017. Production in Suriname also grew in Q4 (3t yoy), as Newmont’s Merian mine began commercial production in October.

Russian Q4 production (6t yoy) was hit by flooding at some of the largest operations, while production in Mongolia fell by 5t yoy due to the mining of lower grade ore at Oyu Tolgoi. The Q4 decline in Mali (4t yoy) was partly due to a comparison with a high base quarter. Plateauing production is inevitable given industry costcutting since 2013.

Gold miners recognize that the capital intensive nature of the industry is driven by two key factors: the costs of extracting gold from the ground, and the costs associated with replacing those gold reserves. Despite the need for strategic reserve levels to be maintained, the project pipeline is considerably thinner and exploration budgets were cut in recent years.

But 2016 signaled a renewed vigor for exploration? increased project development may be around the corner. Higher local gold prices, coupled with lower costs, allowed producers to reap higher margins. Coffers were boosted, providing opportunities for a pickup in brownfield and, to a lesser extent, greenfield spending.

In November, a Moody's report predicted that the higher average gold price in 2016 will spur an increase in capital spending over the coming year. SNL Metals & Mining, in its recent Gold Mined Supply Report, also highlighted renewed interest in exploration in the latter part of 2016.

Acacia Mining is a prime example? it expects its 2017 greenfield budget to be around 15% higher than in 2016 , with CEO Brad Gordon telling Reuters , "This is part of our longterm strategy to invest in exploration when the rest of the industry is walking away from that".

Increased exploration is unlikely to affect mine production anytime soon. A greater focus on project development is understandable. Large scale discoveries of gold are becoming rarer. But the gold price will continue to dictate the speed of this development. What's more, given the long lead times involved, it is unlikely that new discoveries or major project developments will significantly impact annual production for the foreseeable future.

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