Miners plot supply ramp up, as gold price hits fresh high

GOLD miners across the world are poised to bolster production by almost 5 percent as prices eclipse all-time highs.

The LBMA’s close-of-day price climbed to US$2 125/ounce overnight, crossing US$2 100/ ounce for the first time in history and ending years of pounding at a glass ceiling since previous highs were struck in August 2020.

It comes as miners look to ratchet up gold production despite concerns it has lost its lustre as an investment opportunity to Bitcoin and battery metals stocks.

Industry analysts Metals Focus say new output from mines currently under construction, expanding or restarting will lift global gold production from 3 644 tonnes in 2023 to 3 816 tonnesin 2025. That would smash the record output seen in 2018 of 3 656 tonnes.

Will a sudden lift in output to new records kill the Golden Goose before its egg hatches?

It’s important to remember that gold isn’t like the other girls.

Gold doesn’t follow much of the supply and demand logic when it comes to price movements surrounding industrial, bulk and battery metals like iron ore, aluminium, copper, lithium and nickel.

While consumption of gold in jewellery and electronics contribute to demand for the physical metal, the latter especially so, it is primarily a financial instrument.

For that reason gold is more sensitive to macroeconomics and geopolitics. Central banks have underpinned price support in recent years, especially non-Western actors like Turkiye, Russia and China concerned about their exposure to the US dollar.

The crisis in the Middle East and Ukraine has provided safe haven support as investors look to protect against any economic fallout from the wars.

Finally, gold’s production, marketing and refining are unusually diverse. There is no single dominant producer like Australia and Brazil’s role in iron ore or refineries like China in lithium and graphite.

Metals Focus says the largest contributor to the new gold rush will be North America, where IAMGold’s Cote mine will start producing early this year at a rate of 6-8tonnes per annum (tpa), ramping up to 13tpa (418 000 ounces).

Equinox Gold’s Greenstone mine, Artemis Gold’s Blackwater, Ascot Resources’ Premier Calibre’s Valentine and an expansion of Alamos Gold’s Island mine are expected to deliver 33t of additional output between them.

South America, notably via Gold Fields’ 13tpa Salares Norte in Chile, will contribute to 18 percent of additional output, with African production to provide 17 percent of the growth.

Shandong Gold’s Namdini mine in Ghana, picked up in its acquisition of ASX-listed Cardinal Resources, will deliver 9tpa for 15 years from the final quarter of 2024.

ASX-listed Chinese takeover target Tietto Minerals is expected to deliver 5tpa once its Abujar mine rises to steady state production levels.

Oceania, including Australia, will be more moderate adding just 12 percent of new supply, including 4tpa from the Bellevue Gold mine, which poured its first ounces late last year. —