Big Wet Drowns Gold Output
The Age
Monday May 28, 2007
HEAVY rain again restricted Australian gold output in the March quarter, although the industry had nothing to complain about in terms of the continuing strength of gold prices.
According to a production survey released yesterday by the Melbourne-based mining consultant Surbiton Associates, March-quarter production was 60.3 tonnes (1.93 million ounces), down modestly on the 61 tonnes in the previous corresponding period when wet weather was also a negative factor. Apart from the weather impact, Surbiton managing director Sandra Close said that higher gold prices did not necessarily translate into increased production in the short term."Higher gold prices can lead to lower gold production as mine operators reduce the grade of ore fed into their treatment plants. This allows them to extend the lives of their mines and extract as much of the gold in the ground as possible," Dr Close said. During the March quarter, Australian gold prices averaged $827 an ounce, about $30 an ounce higher than in the December quarter and 50 per cent higher than the $550-an-ounce average in the 2005 March quarter."I think we are still seeing a degree of 'low-grading', where ore grades are being deliberately reduced," Dr Close said. "This is good mining practice even though it leads to higher production costs per ounce."Dr Close said there had been much hand wringing about rising production costs and the effects on the industry. But for Australia the margin between the average cash cost per ounce of production and the average gold spot price was "pretty healthy".Australia's third biggest goldmine, Newcrest's Telfer mine in Western Australia, was hit by by three cyclones in March.
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