PERTH (miningweekly.com) – Gold production in Australia rose for the second consecutive quarter during the three months to September, despite the lower prices, mining consultancy Surbiton Associates reported on Monday.

Gold output increased by 4% to 69.5 t in the September quarter, up from 67 t in the June quarter. This was also a 12% increase on the 62 t produced in the September quarter of 2012.

“The higher production was due to the treatment of higher ore grades and this, in turn, reduced cash costs. This is precisely what we expected, given the decline in gold prices in April and the lack of a significant recovery since then,” said Surbiton director Sandra Close.

She noted that the US dollar price of gold was around $1 580/oz at the start of April and fell as low as about $1 190/oz by the end of June. It recovered to average $1 326/oz for the September quarter and was currently around $1 240/oz.

“However, it is the Australian dollar gold price which is important locally. Fortunately, the decline in the Australian dollar exchange rate has given producers some relief, with the Australian dollar falling from around $1.05 to around $0.90 this year,” Close said.

“One of the notable features in the September quarter is the substantial decline in cash costs for Australian operations. This is due to two factors – increased ore grades and operators’ renewed focus on cost reductions across the board.”

During the decade-long period of rising gold prices between 2001 and 2011, gold producers progressively reduced the grade of ore being treated, Close noted. This resulted in lower gold production and higher cash costs.

Currently, the reverse was happening, particularly since the fall in gold prices earlier this year. Close noted that higher grades were being treated, gold production had increased and cash costs had fallen.

“Mining higher-grade ore is a perfectly rational response when the price of gold declines, so that margins are maintained. This should not be confused with the practice of ‘high grading’, where only the richest ore is treated and the resource not properly used.” 

Close said the Western Australian government, which was currently reviewing mining royalty rates, should tread lightly when it came to the gold miners. Western Australia produces about 70% of Australia’s newly mined, primary gold.

“I am all in favour of the states receiving a fair royalty but it is a delicate balance. If the royalty is too low, the state government and the community lose out, but if it is too high some operations will close, unemployment will rise and investment in the gold industry will decline.”

“The latest numbers show the gold mining industry is working hard to remain competitive while in the minerals industry as a whole, unemployment has risen considerably. Now is not the time to put further cost pressure on the gold producers,” she added.

During the September quarter several operations posted significant increases in gold production. Gold miner Barrick’s Yilgarn South operations, which was recently sold to Gold Fields, were up 42 000 oz, while Newmont’s Tanami output rose by 38 000 oz and output at Newmont and Barrick’s Super Pit was up 24 000 oz.

On the other hand, production at Newcrest’s Telfer operation was 38 000 oz down, as treatment of lower-grade underground ore was cut back.

Two new operations joined the list of producers during the quarter. Doray Minerals’ Andy Well operation produced 13 800 oz and the Tropicana project, owned by AngloGold Ashanti and Independence Group, poured its first gold on September 26.

Tropicana is scheduled to produce around 100 000 oz of gold in the December quarter this year.