The Australian Gold Industry, Trade, And MarketsBy Thuong Nguyen, Economist, Australian Government Department of Industry, Innovation and Science
The resources sector, including the gold industry, is a major contributor to the Australian economy, accounting for more than half of the country’s exports.
Australia is the world’s second-largest gold producer after China, accounting for 9.4% (315 tonnes) of global gold mined production in 2018 (Figure 1). The Australian gold industry comprises 71 operating gold projects (some containing multiple individual gold mines) across all Australian states and territories, except the Australian Capital Territory. Western Australia leads production, with 68% (215 tonnes) of Australian gold production.
Australia has five of the world’s 20 largest gold mines. These include the Cadia mine, in 10th position, Boddington (11th), Super Pit (14th), Tanami (19th) and Tropicana (20th). These five gold mines account for 2.8% (95 tonnes) of global gold production.
Australia also has two of the world’s 20 largest gold mining companies, of which Newcrest Mining is 10th and Northern Star Resources is 20th. These two companies account for 2.9% (99 tonnes) of global gold mined production.
Most gold mining companies have adopted the World Gold Council’s guidelines for reporting all-in sustaining cost (AISC) of production. Australia’s average AISC is US$742 per troy ounce, which is below the world AISC average of US$804 per troy ounce. Australian gold producers are, on average, more competitive than gold producers in Canada, United States, Brazil and South Africa, but less competitive than those in Russia, China and Mexico. Healthy margins are being made throughout the sector on a per ounce gold basis.
Presently, the Australian gold industry is enjoying favourable market conditions, with high gold prices in Australian dollar terms. Both Australian and US dollar gold prices have trended up over the last few years, and an upward trend is expected to continue until 2024.
The strong Australian dollar has helped invigorate exploration in the Australian gold sector, with numerous Australian gold producers now planning to raise output. Australia’s gold exploration expenditure has increased in the four years to 2018, with spending averaging AUD$684 million a year over that period. In 2018, expenditure on gold exploration was AUD$891 million. This represented 41% of total expenditure on minerals exploration in Australia. The majority of gold exploration expenditure has been used for upgrading resources around existing deposits, particularly converting inferred resources into higher resource categories.
Figure 1: Australia’s gold industry
Figure 2: Major Australian gold deposits
Australia is not only a major producer and exporter of gold: it is also a key player in the gold refining industry. Most gold mined in Australia is refined at the Perth Mint Refinery in Western Australia before being exported. Perth Mint is one of the largest refineries in the world, with an annual refining capacity of over 300 tonnes. The refinery is one of a few global gold refiners with accreditation from all of the major gold exchanges – the London Bullion Market Association (LBMA), the New York Commodity Exchange (COMEX), the Shanghai Gold Exchange (SGE), the Tokyo Commodity Exchange (TOCOM), and the Dubai Multi Commodities Centre (DMCC).
ABC Refinery – the exclusive manufacturer of ABC Bullion – is Australia’s largest and most technologically advanced independent gold refinery in Australia, accredited by SGE and LBMA. The accreditation is a testament to its ability to refine and produce gold products to a world-class standard.
Australia is the world’s sixth-largest gold exporter, behind Switzerland, Hong Kong, United Kingdom, United States and United Arab Emirates. In 2018, Australia exported 341 tonnes of refined and unrefined gold bullion, with a value totalling US$14 billion.
In 2018, demand for Australian gold was largely dominated by Hong Kong and China, which accounted for 37% and 31% of Australia’s total gold exports respectively. Hong Kong is a fast-growing market for Australian gold, as the Special Administrative Region’s close links to China and the recent collaboration between the Shanghai Gold Exchange and the Chinese Gold and Silver Exchange has increased physical gold trading activities. Other important destinations for Australia’s gold include the United Kingdom — with an 8.5% share of Australia’s gold export markets — followed by Thailand (8.2%), Singapore (6.2%), and India (3.8%).
Figure 3: Australia’s domestic gold pricesSource: London Bullion Market Association (2019); Australian Government Department of Industry, Innovation and Science (2019)
Figure 4: Economic demonstrated resources of goldSource: Geoscience Australia (2019); Statista (2019) World mine reserves of gold
Australia imported 112 tonnes of gold in 2018, with a value of AUD$6.1 billion. Of this, 47% came from Papua New Guinea (PNG), 9.3% from New Zealand, and nearly 44% from other countries. Virtually all gold ores from the Ok Tedi mine in PNG are shipped to the Perth Mint refinery for processing and re-export.
Australia’s domestic gold market consumed 54 tonnes of gold in 2018. There are 82 gold bullion traders in Australia which provide facilities to buy, vault and trade physical gold bullion. Despite having no bullion market exchange, the Perth Mint – a member of the LBMA – has been considered as something of a proxy for the Australian gold market. It distributes over AUD$18 billion of pure gold, silver and platinum bullion bars and coins to investors in more than 100 countries every year. Through its depository capacity, the mint also provides the world’s sole government precious metals investment and storage program.
Significant challenges to the sustainability and longevity of the Australian gold industry exist, including the identification of new quality resources to facilitate timely ore reserve replacement. The March 2019 Resources and Energy Quarterly estimated that around 153 tonnes of gold mine capacity (at current production rates) in Australia would be shut down between 2019 and 2024.
The long term future and sustainability of the Australian gold industry is reflected by its economic demonstrated resources (EDR), which refers to resources that are established, analytically demonstrated or assumed with reasonable certainty to be profitable for extraction or production (Figure 4). Australia’s EDR is the largest of any country in the world, with 18% of the total, ahead of South Africa (11%), Russia (10%), the United States (6%), and Peru (5%). At the end of 2017, Australia had an accessible EDR of 10,070 tonnes of gold, of which 38% (3,869 tonnes) was classified as ore reserves. Approximately 75% (2,903 tonnes) of the gold in ore reserves is attributable to 71 operating gold projects.
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