Canada slips to fourth place among world’s gold producers

Average cash costs for non- communist producers rose 5.5%, from $236(US) per oz in 1987 to $249 last year. Fortunately, with gold averaging $437 per oz in London in 1988 (down from $446 the previous year), gold mining in general remained a profitable business.

For 1988, Canadian producers’ cash operating costs averaged $214, ahead of the United States ($223), Australia ($238) and South Africa ($275). The Canadian average rose from $201 in 1987.

Higher wage settlements in recent years have had an adverse effect on the labor-intensive South African mining industry, Gold Fields reports in its annual, authoritative review of the industry.

“Higher working costs per tonne milled brought about by some (South African) mines reaching the end of their economic lives, combined with the lower average grade that was mined, exacerbated the rise in operating costs,” writes the London-based company in its report.

A big jump in output by Australian producers catapulted the southern hemisphere nation to third place among non-communist countries last year. Canadian production rose to 128.5 tonnes from 116.5 tonnes, while Australia’s output totalled 152 tonnes compared with 110.7 tonnes the year before. Second among producers was the United States, which saw its total increase to 205.3 tonnes from 154.9 tonnes the year before.

South Africa managed to boost its 1988 production to 621 tonnes from 607 tonnes. However, the country’s share of total world production has dropped to slightly more than 40%. (At the beginning of the current decade, South Africa accounted for about 70% of new production world-wide.) Increases in gold production in other countries, in particular Canada, the United States and Australia, are largely responsible for the decline in South Africa’s share of global non-communist output.

Total mine production in 1988 in the non-communist world is estimated by Gold Fields to be 1,538 tonnes, up 11% from 1987. Total world supply (including communist sales and scrap) was 1,850 tonnes, down almost 10% from the previous year. Despite the relatively strong supply position, demand for the yellow metal (especially for fabrication into jewelry) was overwhelming, and Gold Fields reports a net implied disinvestment (or deficit) for 1988.

“The demand for gold for fabrication into jewelry and other products worldwide, and for investment in the traditional bar hoarding areas outside Europe and North America, rose to unprecedented levels,” Gold Fields writes. “Jewelry manufacture enjoyed a year of spectacular growth, largely because of the rise in real incomes, especially in Asian countries.”

Demand for fabrication into jewelry was up almost 30%, while consumption of newly-mined gold in jewelry jumped an estimated 40%. Total fabrication supply absorbed all but six tonnes of the conventional supply.

Helping to tilt the supply-demand ratio toward balance was the increase in the level of gold loan and forward sales activity, as well as some selling from investment holdings in Europe and North America, says the report.

Of special interest in 1988 was the rise in central bank purchases, with Taiwan, through the Central Bank of China in Taipei, leading the way. Gold Fields estimates the supply of gold to the private sector decreased by 270 tonnes last year because of the banking transactions. Less gold was used to make coins in 1988 than the year before (for the second straight year), with coin sales slumping by about one-half. Total gold used to make coins last year was 32% less than in 1987.

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