Australia’s gold exports are forecast to hit a record high of AUD $25 billion in 2019-20 according to the Department of Industry, Innovation and Science’s September edition of Resources and Energy Quarterly (REQ).
The September REQ shows Australia remains the world’s second largest producer of gold, with production increasing by 6.3% in FY 2018–19 to 321 tonnes, equating to 9% of the world’s total supply in 2018. Further, Australia still holds the record for the world’s largest gold nugget – the Welcome Stranger – which was unearthed in central Victoria in 1869 and weighed almost 72 kg.
According to the report’s latest data, the world gold supply is forecast to continue to grow, as producers ramp-up their production to maximise the benefits of high gold prices. Consequently, the report indicates Australian gold prices are forecast to rise to another record annual average high of AUD $2,042 an ounce in 2020, with exports forecast to increase by 33% hitting a record high of $25 billion in 2019-20.
These estimations are a result of looking back at the year that was, when Australian gold prices hit a new record high of AUD $2,289 an ounce on 3 September 2019.
The REQ states global economic uncertainty, trade tensions and a desire to diversify out of the US dollar, all appear to have been the catalyst for central banks’ growing appetite towards gold. The report shows in the period between 2008–09 and 2018–19, demand for Australian gold was largely dominated by China, Hong Kong, the United Kingdom and India.
According to the World Gold Council, nine central banks: Poland, Russia, China, Kazakhstan, India, Ecuador, Colombia, Turkey and the Kyrgyz Republic; all increased their gold reserves by at least a tonne in the first half of 2019, and the central banks are likely to continue to support gold prices over the next few years, with their purchases expected to stay above 700 tonnes in 2020, as gold faces higher demand as a safe-haven asset.
World gold consumption had increased by 7.9% in the first half of 2019 to 2,182 tonnes, propelled largely by the central bank buying, inflows into gold-backed exchange traded funds (ETFs), and significant growth in the desire for gold jewellery.
The REQ indicates overall retail investment is expected to drive up global gold demand in 2020 and 2021, reflecting the impact of trade tensions, the global economic slowdown, and political uncertainty in Europe and the Middle East.
The report states a rise in world gold supply in the first half of 2019 was driven by rising mine production in major gold producing countries such as Australia, Russia and Canada.
In Australia, production from Newcrest Mining’s Cadia Valley gold mine in New South Wales rose by 52% in 2018–19, to over 28 tonnes, and was the mine’s largest ever annual gold production. This also entrenched Cadia Valley as Australia’s largest gold producing mine in FY 2018–19. Similarly, Newmont Goldcorp’s Tanami gold mine production in the Northern Territory increased by 13% in 2018–19, to over 16 tonnes, driven by an improvement in ore grades.
Newcrest Mining’s Cadia Valley gold mine in NSW, Kirkland Lake Gold’s Fosterville gold mine in Victoria, Evolution Mining’s Mt Carlton and Mt Rawdon gold mines in Queensland, and Northern Star Resources’ Jundee gold mine in Western Australia, all featured in the list of Australia’s top ten lowest AISC mines in 2018 – which measures the cost of operating efficiency.
The report further states Australia’s gold exploration expenditure in 2018–19 also rose by 19% to AUD $964 million, largely driven by higher Australian gold prices. WA remained the nation’s centre of gold exploration activity, accounting for 70% (or AUD $673 million) of total gold exploration expenditure.
Looking forward, the REQ states Australia’s gold mine production is expected to continue to grow by 4.8% in FY 2019-20 to 337 tonnes, and a further 2.2% in FY 2020-21 to 344 tonnes. This growth is predicted to be largely driven by several new mines.
Joint venture partners Gold Fields and Gold Road Resources have begun ramping up development of the Gruyere gold mine in WA, pouring their first gold in July 2019. Meanwhile, Regis Resources’ McPhillamys gold mine in NSW and Capricorn Metals’ Karlawinda gold mine in WA are both expected to commence production in early 2021.
The REQ states the Australian gold industry is currently experiencing a production revival, with some Australian producers reopening gold mines previously under care and maintenance, or which were on suspended production at lower prices.
The Resources and Energy Quarterly (REQ) is a publication produced by the Australian Government’s Department of Industry, Innovation and Science, and contains the Office of the Chief Economist’s forecasts for the value, volume and price of Australia’s gold commodity exports.
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