Gold production up, export value down

GOLD exports from Western Australia last year totalled $13.65 billion, down on the $16.5 billion a year earlier, as a rising Australian dollar wiped off some of the gains of higher production.

The result pushed Gold Corporation, the country’s sole gold refiner, to third spot on the WA Business News ‘Book of Lists’ exports category behind the consolidated WA businesses of mining giants BHP Billiton and Rio Tinto.

But on a standalone business basis, Gold Corp ranked second behind Rio Tinto’s powerhouse iron ore division, which came in first with 2009-10 exports of $17.1 billion.

A state-government controlled entity, Gold Corp operates the Perth Mint and refines gold from Australian mining operations. A large proportion of its refining is also imported from overseas, namely Papua New Guinea, Thailand, New Zealand, Fiji and Malaysia, and then re-exported.

Gold Corp is the country’s sole gold exporter and increased the scope of its operations by taking full ownership of bigger gold refiner, AGR Matthey, earlier this year. The 2009-10 estimate of its total export revenue takes into account AGR Matthey’s share of exports before the business was taken over by Gold Corp in March.

Gold Corp previously held 40 per cent of AGR Matthey, with Newmont Mining holding 40 per cent and London-headquartered refiner Johnson Matthey holding 20 per cent.

Newmont instigated the split after deciding to focus solely on its gold mining activities in Australia.

Gold Corp paid $9.5 million, and its full takeover of the refining business paid immediate dividends to the state.

Having sole control of the business for the whole June quarter helped to double Gold Corp’s total attributable sales for the year to $5.75 billion.

However, the cost of the acquisition and reduced bullion and coin exports cut Gold Corp’s attributable net profit in half to just $13.03 million.

As an industry, Australian primary gold production totalled 7.9 million ounces in 2009-10, or 245 tonnes, up from 7.1 million ounces the previous year. Of that, WA miners produced 5.5 million ounces, up from 4.4 million ounces previously.

But export revenue was hit by the higher Australian dollar, offsetting some of gold’s gains as it is bought and sold in US dollars.

However, the key reason for WA’s total gold export revenue falling from $16.5 billion to $13.65 billion was a 22 per cent decline in total exports to 342t.

The total export tonnage includes an extra 100t of gold, either brought in from overseas or from existing stocks, which was exported after processing at Gold Corp’s WA refinery.

The Australian Bureau of Agricultural and Resource Economics attributed the decline to weaker global fabrication and reduced retail demand for gold coins and bars.

Quarterly exports values in WA from 2009-10 show incremental increases in value, from $2.9 billion in the September 2009 quarter to $4.3 billion in the June 2010 quarter.

The quarterly increases reflect higher production from mines and an increased gold price.

Production from July 2009 to June 2010 was the highest in Australia for six and a half years.

WA’s 67 per cent share of national gold production was not surprising, considering the state is home to the largest mines in the country.

Kalgoorlie’s Super Pit, held in a 50-50 joint venture between Denver-based Newmont Mining and Toronto-based Barrick Gold, set the benchmark, with 758,000 ounces produced in 2009-10.

This was followed by Newcrest Mining’s Telfer mine, in the eastern Pilbara, with 688,909 ounces.

A relatively new entrant into the list of top mines was Boddington with 464,000 ounces. Newmont owns the operation, 130 kilometres southeast of Perth, which is expected to produce up to 1 million ounces a year and have a 20-year mine life.

The St Ives mine near Kambalda, owned by South Africa’s Gold Fields, produced 421,079 ounces during the year and claiming fifth spot was Johannesburg-based AngloGold Ashanti, with 409,954 ounces from the Sunrise Dam mine near Laverton.

WA mines that ramped up during the year, and made a contribution to the increased production figure, included the Frog’s Leg mine near Coolgardie, owned by Canada’s La Mancha Resources and Perth-based Avoca Resources, and Saracen Minerals Holdings’ Carosue Dam mine near Kalgoorlie.

ABARE said increased production from key mines in WA, including Boddington, the Super Pit, Carosue Dam and Avoca’s Higginsville operation near Norseman, would be pivotal to a forecast rebound in total gold exports to $16.5 billion in 2010-11 on the back of total exports of 441t.

In addition to increased mine production, it also expects a big rise in ‘re-exports’ of gold refined in WA due to resurgent gold fabrication demand, increased retail demand for coins and bullion, as well strong Asian demand for gold jewellery.