Gold production increased for the tenth consecutive year in 2018 to 107.3-million ounces and is expected to reach a new record high of 109.6-million ounces this year, S&P Global Market Intelligence research analyst Christopher Galbraith said on Tuesday.
He noted that while the year-on-year increase of just under 1% in 2018 was the smallest in the last decade, output has risen by 40% since 2008.
"We believe the forecast growth of 2.3-million ounces in 2019 will be the strongest growth in the past three years, debunking commentary calling for peak gold. More than half of the increase is projected to come from new mines that are expected to come on stream this year or have recently been commissioned."
Galbraith said that, based on the current project pipeline, S&P Global Market Intelligence expects output to remain stable until 2022 as new production coming on stream over the next five years is expected to produce as much as 4.3-million ounces a year by 2024.
Another 11.7-million ounces is expected from projects that are currently undergoing feasibility studies or where owners are evaluating project restarts.
Falling production from depleted operations over the next several years will start outpacing that growth by as early as 2021.
“From , gold production is expected to fall by over three-million ounces in 2023 and by up to five-million ounces in 2024."
Galbraith expects that, by 2024, Canada will be the only major gold-producing country to increase output, with Australian production declining the most.
The report notes that several Canadian mines, including Agnico Eagle Mines’ Meliadine and New Gold’s Rainy River operations, are driving growth in national output and are expected to do so for several years.
“We project that the increase will push Canada past the US in gold production in 2019 to become the world's fourth-largest gold producer,” Galbraith noted.
He stated that very few Canadian gold mines face depletion and, as a result, the country’s output is expected to increase by four times more than that of Ecuador – which will have the second-largest increase in output – over the next five years.
Ecuador's projected increase is as a result of several new projects, including Lundin Gold’s Fruta del Norte and INV Metals’ Loma Larga operations.
Among the countries with lower projected production, Australia's output is projected to fall the most, with the country slipping to become the fourth-largest producer globally in 2024.
Russia's gold production is expected to match that of Australia in 2020. Russia will have surpassed Australia’s production by 2024.
“Peru's production is also trending downward over the next five years, with Orcopampa, La Zanja and Tambomayo facing depletion before 2024. With closure only a few years further out, Lagunas Norte and Yanacocha will also be producing far less gold in 2024 than they have historically,” Galbraith commented.
Galbraith said that, as the gold price declined through 2016/17, it was increasingly important for producers to maintain an optimal grade profile, as the environment placed increased pressure on costs.
“From 2014 through 2018, throughput at primary gold mines increased by 1.2%. Meanwhile, the weighted-average gold grade increased by 4.5% and, as a result, gold production from primary gold mines increased by 6%,” he noted.
Save for a slight dip in 2018, Galbraith predicted that the increase in grade would continue through 2020 and maintain higher-than-current levels thereafter.
“In 2021, we expect ore throughput to remain steady but grade to fall by 2% year-on-year. These two factors are expected to account for around 1.6-million ounces in reduced production,” he pointed out.
By 2024, about 241-million tonnes less ore is expected to be fed at gold mills compared with 2019, while the gold grade will be almost 2% higher. Owing to the drop in throughput, the related drop in production from primary gold mines will be almost nine-million ounces, Galbraith explained.
As such, a growing share of gold production will come from base metal mines.
BASE METAL SOURCES
In 2018, more than 11% of global gold production came from polymetallic base metal mines – a considerable increase of two-million ounces more than in 2017 – with more than one-million ounces of that coming from the Grasberg copper mine, in Indonesia.
Galbraith pointed out that the Grasberg inspired increase would not be repeated as its gold production is expected to fall by 900 000 oz this year, owing to declining grades.
Additionally, most of the polymetallic mines will experience only a brief interval of gold-rich ore, so gold production from those mines will fall in 2019 and 2020.
However, beyond 2020, polymetallic mines' gold production is expected to increase gradually, as production from primary gold mines decline.
After 2020, “a growing share of the world's gold production will come from sources where gold is a by-product. Less than 10% of the world's production is expected to come from secondary sources in 2020, but this amount is expected to grow to more than 11% by 2024,” Galbraith noted.