Gold supply levelling off according to Gold Fields

The Western world mine supply of gold rose to a new high in 1990, but the rate of growth was less than in 1989, indicating total world supply may soon be levelling off.

London-based Gold Fields Mineral Services, author of the authoritative Gold 1991, said global mine output moved up by 3% to 1,733.9 tonnes in 1990, the smallest increase since 1981.

“South African output, widely expected to fall in the wake of rationalization measures adopted by many mines, held up well due to the concentration of mining on higher-grade ore,” wrote the Gold Fields researchers. One of the report’s authors, Philip Klapwijk, recently made a presentation in Toronto to a group of financial analysts.

In 1990, South Africa accounted for about 35% of new Western world gold production, down considerably from a few years ago but still far ahead of other producer nations. South Africa’s 1990 output, at 605.4 tonnes, was off slightly from 1989.

Gold output in the U.S. and Australia jumped by more than 10% last year. American production of 295 tonnes vaulted the U.S. into second place, ahead of the USSR.

Australia, in fourth position at 241.3 tonnes, benefited from high-grading by producers in advance of the introduction of a tax on gold-mining profits in January of this year.

In fifth spot last year was Canada, at 165 tonnes, up by 3% from 1989, followed by China at 95 tonnes. Brazil, in seventh position, saw its total output drop by 23% last year, mainly because of the government’s liquidity squeeze which affected garimpo production, Gold Fields said.

Average Western world cash costs increased by 5% in 1990 to an estimated US$265 per oz. (The 1989 cost increase was estimated to be less than 1%.). Total mining costs in 1990 averaged an estimated US$323 per oz.

Canada’s average cash cost in 1990 was estimated to be US$248 (up from US$246 the previous year), compared with US$237 for the U.S. and US$308 for South Africa.

The David Bell mine of Teck (TSE) and Corona (TSE) in the Hemlo area of northern Ontario reported a 1990 cash cost of US$89 per oz., the lowest in Canada. Gold Fields said more than five Canadian mines reported cash costs above US$425 last year.

Topping the 1990 global list of the lowest-cost gold mines was the Porgera joint venture in Papua New Guinea, which for its initial 17 weeks of operation last year (following a commissioning period) produced gold at a cash cost of US$87 per oz.

“Overall supply of gold to the market as a result of forward selling activities and gold loans rose during 1990,” wrote Gold Fields. “The increase was entirely due to the growth in forward selling as net supply deriving from gold loans was minimal.”

Fabrication of gold rose in 1990 by 4%, well off similar advances of the previous two years. Carat jewelry accounted for 83% of total fabrication last year, up by 6% but well below the average growth in this area during the previous two years. Electronics fabrication and official coins are the other main uses for gold.

Gold Fields said bar hoarding suffered a sharp reduction in 1990 because of a loss of interest by buyers in Japan, Taiwan and Hong Kong and a slowdown of purchases in Brazil.

On the investment side (that is, investor holdings in Europe and North America), Gold Fields recorded a surplus of 144 tonnes in 1990 after reporting disinvestments the previous two years.

Looking briefly to the future, Gold Fields foresees little movement in the gold price in the short term.