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Dip in gold output

Dip in gold output
By Robin Bromby
March 07, 2005

A DECLINING gold industry - with production at its lowest for a decade - is costing Australia dearly in export earnings at a time when the country is facing a mounting current account deficit crisis.

Gold production last year was 50 tonnes lower than in the peak output year of 1997.

That missing 50 tonnes means a loss of $900 million to our balance of payments, according to Surbiton Associates, which tracks the gold industry.

Production last year of 261 tonnes was the lowest since 1995.

Surbiton blamed the decline on a mix of bad weather, closures of exhausted mines and the legacy of a dive in exploration spending during the dog days of the late 1990s when gold fell to about $US250 an ounce. The metal closed at $US434.30 an ounce in New York last Friday.

Australia's decline is in step with a looming global gold shortage.

Latest figures from the World Gold Council show that gold availability fell by 13.3 per cent last year, the biggest yearly decline in percentage terms since the 1940s.

Mine production was down 4.4 per cent compared with 2003 and totalled 2478 tonnes.

But the overall availability was reduced as producers bought gold to reduce their hedge books and less scrap came on the market. Central bank gold sales also fell.

This meant a gold supply of 3360 tonnes against 3560 tonnes the previous year.

Surbiton managing director Sandra Close called on the federal Government to make mineral exploration more attractive. The downward trend in Australia's gold output was the result of lower exploration spending and fewer discoveries.

"Despite the euphoria of the current resources boom, we are living on borrowed time," she said. "It's five years since the last significant greenfields gold discovery was made in Australia."

But this year's production outlook is looking a little rosier.

Newcrest Mining is ramping up its huge Telfer mine in Western Australia and has brought into production the Cracow mine in Queensland. Gold Fields of South Africa is expanding the St Ives mine it bought from WMC Resources, Perseverance Gold is heading for a first gold pour at Fosterville in Victoria and Perilya has started mining at Daisy Milano, southeast of Kalgoorlie.

Australian gold production last year was 6.5 per cent down on 2003. One of the causes was exceptionally wet weather early last year in Western Australia - the state that produces three-quarters of the country's gold.


LINK: http://finance.news.com.au/story/0,10166,12463267-462,00.html