Australia closing in on Canada’s gold output record

From a standing start five years ago, Australian gold production has increased dramatically. Indeed, the country is now challenging Canada’s third-place position among Western gold producers — the No 3 spot behind South Africa and the United States. In 1982, Australian gold production was about 18 tons compared to 75 tons in 1986 — a 4-fold increase over that period — and it’s expected to be higher this year.

For an in-depth perspective on the Australian gold mining scene The Northern Miner talked to Ross Louthean, managing editor of the popular Gold Gazette, an industry newsletter with a wide following in Australia. Similar to Canada, exploration in Australia has generally been directed towards precious metals including platinum and polymetallics, the latter with a gold credit.

Western Australia accounts for most of the country’s gold production; and companies have been attracted there because it has one of the more liberal mining policies in the country. Louthean said it was relatively easy to explore in Western Australia because a large part of it is crown land or “unalienated land” where land issues “have been kept in their place.” (Much like Canada, aboriginal or native land claim issues have sometimes made mine development in contested areas difficult.) But he conceded that drill rig availability has been poor with all the activity and the lack of water in parts of the state having eliminated many prospective areas.

Given the recent market crash, Louthean expressed some concern 2500 that Australia’s gold mining industry might not be able to sustain the rate of growth seen in recent years. Indeed, a few mining people we talked to suggested the pace of new mine development will taper off considerably in the coming year.

Louthean predicted the recent market crash will squeeze junior companies which have been responsible for many of the country’s smaller mining projects. As a rule these tend to be located around areas with some production history. “A lot of them will be forced to joint venture projects because their floats failed in the market crash,” he said. In the past, some of these companies were financed out of Perth which was especially hard hit in the downturn.

Australia promotes the fact that it doesn’t have any gold tax which has tended to attract companies to 3706 the country. But Louthean said the Northern Territory levies an 18% royalty on gold mining profits which he described as a “pretty severe tax.” There is also a 5% production royalty on Placer Dome’s Kidston mine which he argued was essentially a production tax and this applies throughout Queensland. A recent attempt by the federal government to tax gold mining was unsuccessful partly because the premier of Western Australia, Brian Burke, intervened. His labor government squared off with its federal counterpart and “helped win the day,” said Louthean, who predicted that Australian gold production will reach 100 tons this year.

Even so, the larger the industry becomes the more attractive a target it is for taxation, especially when other industries are shouldering a heavy tax burden.