Australian gold production hit an all-time record last year of 317 t, compared with the previous record of 314.5 t in 1997, according to Melbourne-based gold mining consultants Surbiton Associates.

“The record output in 2018 was worth A$17.3-billion at the average spot price,” said director Dr Sandra Close.

Gold production totalled 81 t in the December quarter, making it the third consecutive quarter where Australia’s gold output exceeded 80 t. Production in the first quarter of 2018 totalled only 74 t, owing to wet weather and production problems at some operations.

“It took 21 years to break the old calendar year record and the outlook for the near term looks positive but of course there can always be surprises,” Close said.

“Following a fall to just 220 t in calendar 2008, the industry has bounced back, helped in part by the weakening of the Australian dollar against the US dollar, as it has fallen from around parity to near US 70c in the last decade.”

“The last few months have been a time for records,” Close said. “Not only did we have record gold production for the 2018 year and near record quarterly production, but the gold price in Australian dollars also hit an all-time record of A$1 876/oz on February 20, this year.”

The Australian gold price averaged A$1 711/oz  in the December 2018 quarter and so far has averaged more than A$1 820/oz for early 2019. Although the US dollar gold price is slowly rising, with the Australian dollar currently around $0.07, the gold price in Australian dollar terms is also continuing to rise.

On the production front, Close notes that Gold Fields and Gold Road’s Gruyere joint venture, some 200 km north-east of Laverton, will start up mid-year. Production is scheduled to ramp up to about 300 000 oz (or some 10 t) a year at full capacity.

The Fosterville mine, in central Victoria, had already been in production for 20 years when its present owners, Canada’s Kirkland Lake Gold, began discovering zones of high-grade gold ore.

Fosterville will become a significant producer in 2019, as Kirkland Lake has just announced its output should rise from around 350 000 oz in 2018 to some 600 000 oz in 2019. “Its average grade was an extraordinary 40 g/t in the December 2018 quarter,” Close notes.

Newcrest’s Cadia operation, in New South Wales, was the largest producer for the 2018 year at just over 750 000 oz, followed by Boddington, in Western Australia, at about 710 000 oz.

Super Pit had fallen out of the top five gold producers for the first time since Surbiton began its quarterly gold survey more than 25 years ago. The Western Australia-based mine’s production fell to just under 630 000 oz for 2018.

Meanwhile, the higher Australian gold prices have seen an upsurge by Australian gold producers locking in the higher prices by hedging their future production.

“According to quarterly reports submitted to the ASX for the December 2018 quarter, more than one-million ounces (about 31 t) of future production, was hedged by ASX-listed gold producers,” Close said. “To that must be added the gold hedged by foreign-owned gold producers in respect of their Australian operations.”

This is in marked contrast to the attitude of producers for many years when hedging was considered a dirty word and was shunned, not only by overseas companies, but also by many Australian gold miners. In some cases, the companies boasted of their unhedged status and publicised the fact accordingly.

“Hedging and price protection methods of selling, such as forward sales and the use of options, are sensible and legitimate methods of risk management,” Close said. “Many people used to regard hedging as ‘speculation’, when in fact it is precisely the opposite – it is risk reduction.”