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[Ed Monton]

Falling gold output trend to be reversed - report
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http://www.miningweekly.co.za/min/news/today/?show=35320

A new gold industry report highlights that the sustained period of declining exploration expenditure brought about by low industry profit margins will result in a fall in future gold supply. However, the report forecasts that this trend could be reversed between now and 2005, given the improved dollar-gold price and a change in cost environment. It also found that there had been significant changes in production and cost rankings across the industry, mainly on the back of consolidation.

In its Gold Mine Costs 1998 - 2007 report, AME Mineral Economics of Sydney, Australia, said that gold production in 2002 fell by 3,2% to around 2 515 t, its lowest level since 1997 and its first fall since 1995.

The research group confirmed that South Africa's AngloGold no longer headed the output list as the world's largest gold-producing company and that Newmont, with 7,6-million ounces had assumed pole position. It was comfortably ahead of AngloGold (5,94-million ounces) and Barrick (5,7-million ounces).

The report stated, however, that AngloGold emerged as the lowest-cost producer among the pure gold heavyweights, a title it claimed from Barrick. Exchange rate differentials had also had a major influence on the reordering of global cost rankings, with Harmony, Gold Fields and Durban Roodepoort Deep obvious beneficiaries of the relatively weak rand during 2002.

This was likely to reverse in 2003 due to the current strength of the South African rand as the exchange-rate factor was key in driving costs lower in 2002. The report noted that the rand had appreciated this year (up by over 17,5% since early January) and the industry faced considerably altered dynamics.

The analysis also showed that, for the first time in fourteen years, the US was no longer the lowest-cost producer among the four major gold-producing countries.

South Africa remained the world's largest gold producer, which mined around 394 t of gold last year. This was the same as the 2001 figure, which was its lowest output since 1953.

AME also reported that geographical patterns of gold production had shown marked change over the period. In 1990, only 25% of Western World gold was mined outside the four major producing nations. However, by the end of 2002, this figure had risen to 45%. The principal countries that contribute to this redistribution include Indonesia, Peru, Ghana and Papua New Guinea.

Impressive increases in output have also been recorded by Mali, Argentina and Tanzania since 1997. Costs in these new producing regions were typically below the global average.

The Gold Mine Costs 1998 - 2007 report analysed the cost structures of 166 goldmines and has also proposed new developments in 22 countries. Each of these operations will produce, over 50 000 ounces a year - together they account for almost 48-million ounces or 73% of yearly mined gold output. The compilation ranks companies by cost efficiency and also makes a comparison of relative costs of production for Western countries.

The average total production cost (cash cost plus depreciation and royalties) for Western World goldmines in the last year was around $217/oz. This was unchanged from the recorded $216/oz in 2001. In 2002, 94% of annual gold output was produced around the yearly average gold price of $310/oz, indicating that the gold industry has had some considerable success in rationalising and restructuring its high-cost operations.

The average cash operating cost last year was $148 per troy ounce of gold, a small drop from the $151/oz recorded in 2001, but less than the 6% fall recorded a year ago. The average cash cost of gold production by Western World goldmines has fallen by 24% in real terms from $194/oz over the four years since 1998.