The latest weekly Precious Metals newsletter from London-based specialist consultancy Metals Focus at last sees gold output growth grinding to a halt during the current year. Many commentators have been predicting this to happen almost every year since the metal price fell back sharply in 2011, largely ignoring new mega-projects already under construction and too far advanced to be dropped (like Pueblo Viejo in the Dominican Republic) and the industry’s propensity to switch to mining higher grades, where this was possible, to counter declining revenues. As a result of these trends annual global gold output has actually been rising over the past few years, albeit relatively slowly, but Metals Focus now sees this increasing output trend coming to a halt during the current year.
And along with the halt in increasing gold output, the consultancy sees All in Sustaining Costs (AISC) beginning to increase again. The newsletter notes global AISC rose in Q1 2017, both quarter on quarter(+4%) and year on year (+8%), driven by a recovery in some key producer currencies (most notably the South African rand), the general pickup in the commodities sector (which is fuelling an increase in labour expenses and the costs of mine-site consumables) and an increase in sustaining capital expenditure (as the industry looks to adequately reinvest following a period of austerity).
Indeed, Metals Focus comments that the annual supply of new gold (as opposed to recycled material) has grown by around 800 tonnes since 2008, an increase of around 25-30%. It puts this growth trend down to being driven by production increases in countries like China, Russia and Mexico coupled with a number of new mine startups across Africa (outside of South Africa) and a recovery in more mature mining jurisdictions, such as Canada and Australia. But now it sees this increasing production pattern coming to an end. Could Peak Gold, so beloved of gold bulls actually be with us at last?
This post was published at Sharps Pixley