PERTH (miningweekly.com) – Australian gold production rose nearly 3 t, or 4%, to 72 t in the three months to June 30, says mining consultancy Surbiton Associates.

In its latest survey of the Australian gold mining industry, Surbiton found that gold output for the financial year ended June increased by 1% to around 285 t, which, at the current gold price, was worth more than A$14-billion.

Australian gold production was second only to China, which was estimated to have produced 450 t during the same period.

“The increase in the June quarter was mainly the result of more ore being treated by some of the primary gold producers,” said Surbiton director Dr Sandra Close.

“The Super Pit at Kalgoorlie, owned by Newmont Mining and Barrick Gold, lifted production by 44 000 oz, back to its more usual level, while Newmont Mining’s Boddington and Tanami operations, in Western Australia, each produced 17 000 oz more.”

On the other hand, operations producing less gold included St Barbara’s Gwalia mine, in Western Austrlaia, where production fell by 20 000 oz and Gold Fields’ St Ives operation where output was 9 500 oz lower.

“Some of the base metal operations that produce gold as a by-product did not fare so well in the June quarter. At Olympic Dam, owned by major BHP Billiton, gold output was down 17 000 oz due to a mill outage which affected throughput, while at Oz Mineral’s Prominent Hill mine, output was 8 000 oz lower as production of copper took preference to the treatment of gold-only ore,” Close noted.    

One new operation to come into production in the June quarter was ABM Resources’ Old Pirate mine, in the Northern Territory, which began treating ore using Tanami Gold’s Coyote treatment plant.

“Gold treatment plants are hungry beasts. Every three months, the industry treats around 40-million tonnes of gold ore, which must be accessed and developed, either underground or in openpits, then mined and hauled to a treatment plant for processing,” Close noted.

She said that one of the interesting features of the gold mining industry at the moment was the shortage of ore at some plants, particularly in Western Australia.

“Sometimes, operations experience disruptions in the supply chain and if they do not have sufficient ore stockpiles they have to cut production until adequate supplies can be reestablished.

“However, this can provide opportunities for small miners to sell their ore to the mill owners or, alternatively, to negotiate toll treatment arrangements whereby their ore is treated and they receive their gold as doré bars.”

She said that an increasing number of small companies were taking advantage of the spare capacity at some of the larger operations and doing exactly that at the moment – it could be a win-win for both parties.

Ore from GME Resources’ Devon mine was being toll treated through Gold Fields’ Darlot mill near Leonora. Just east of Kalgoorlie, Southern Gold’s Cannon ore would be toll treated at Metals X’s nearby Jubilee plant. To the north of Kalgoorlie, ore from Phoenix Gold’s Castle Hill project would be sold to Norton Gold Mines for treatment at Paddington. Near Coolgardie, Kidman Resources plans to use Ramelius Resources’ mothballed Burbanks plant to treat ore from its Birthday Gift mine.

Meanwhile, Close noted that the weakening Australian dollar was, once again, proving a great benefit to the local gold mining industry, with the price in Australian dollar terms being relatively stable since the start of 2015.

“Despite lower gold prices in US dollar terms, the depreciation of the Australian dollar is proving a blessing for Australian gold producers. Although the gold price averaged $1 192/oz in the June quarter, the Australian dollar gold price averaged A$1 532/oz. It’s reminiscent of what happened in 2008.”

In 2008, gold prices fell from over $1 000/oz in March to less than $730/oz in November. However, the Australian dollar exchange rate benefited Australian producers when it fell by more than $0.21 to $0.61 over the same period. The overall effect was that the gold price in Australian dollar terms was little changed.

“I often wonder why local investors place so much importance on the US dollar gold price. It is the Australian dollar gold price that matters to local producers as their costs are mostly in Australian dollars. Focus on the margin,” Close said.

“I find it quite bizarre to see the share prices of Australia-domiciled gold producers fall in response to a decline in the US dollar gold price when, due to a change in the exchange rate, the Australian dollar gold price has actually risen.”