Category Archives: Gold Companies

Western Australia’s Gold Output Affected By Bad Weather

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The weather is an important factor in the mining industry. As much as rain is important for pretty much everything, it affects mining production in a bad way. The weather in Western Australia and Queensland where most of Australia’s gold mining operations are found. According to the latest reports, Australia has managed to produce 74 tonnes of gold in the first quarter. That’s a 7% decrease from the amount produced around the final quarter of 2017.

 

According to experts, the figures are better than what was anticipated considering the amount of rain that came down in the first quarter of the year. The figure is actually 4% more than what was reported for the first quarter of the previous year. However the wet weather affected production at various mines. Wet weather cause haulage problems and forces operators to use low-grade gold stockpiles just to maintain the mill throughput. In addition to that, wet ore tends to be sticky and when it is, it becomes harder to crush and affects conveyor belts and other equipment designed to deal with mining ore when it is dry. Production plants either run slower or they shut down in parts and stockpile the ore to be run through when the conditions are more favourable. Heavy rains also affect the supply of essential services and consumables like diesel to mines located in remote areas of Australia.

 

Looking at individual operators: the Tropicana Joint Venture by AngloGold and Independence Group produced 34,000 ounces less gold than the previous quarter; Barrick and Newmont’s Super Pit produced 28,000 ounces less gold; Newcrest and Telfer’s operation production was down 33,000 ounces whilst Newmont’s Boddington and Tanami operation fell by 30,000 ounces. The Tanami desert area needs as much rain as it can get, however the rainfall early this year was particularly high, it caused sustained flooding in most areas. Because of this, diesel, which is Tanami mines’ primary fuel could not be trucked to the mine. As a result production fell by 30,000 ounces. Only a small number of mining operations reported a higher output, these include AngloGold’s Sunrise Dam Mine BHP, Silver Lake’s Olympic Dam operation and Mt Monger mining operation. These mining operations produced more gold than expected under the circumstances of wet weather.

 

Weather isn’t the only thing creating difficulties for the mining industry. There is talk that the Australian government is contemplating increasing the royalties of gold mined in Western Australia. This would be a disaster for the mining industry. Although the sector works hard to keep costs low, some gold producers have been unable to control costs and have All In Sustaining Costs (AISCs) that are above the gold price. Imposing a higher royalty would be a peculiar way for the government to retain jobs in an industry that is already struggling. It will also reduce the earnings that the government will make with gold exports. The situation is still being closely monitored and mining companies will soon meet with government to discuss the royalties and the taxes that they are already paying especially at this crucial point in time when the industry isn’t doing as good as it.

Sources:

  1. https://www.australianmining.com.au/news/australian-gold-output-strong-despite-wet-weather/
  2. https://www.abc.net.au/news/rural/2017-09-27/how-will-a-wa-gold-royalty-rise-affect-the-nt/8989634

The West Buys Fewer Investment Grade Gold Coins And Bars In The First Quarter Of 2018

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According to the World Gold Council, Europe’s demand for freshly minted coins and bullion bars is at its lowest. The drop is significant. It is at levels that have not been seen in a while. Jewellery owners, on the other hand, have reduced the selling of their gold jewellery despite the high price of gold. Recycling is an important cog in the gold production cycle and with talk of mines reaching peak gold, the trend is worrying. It means that there is less ready to sell gold on the market or that bullion dealers are sitting with inventory for longer periods than they should.

 

The levels of recyclable gold for the first quarter of 2007 and of 2018 reached the low levels that they were on in 2007. The high price of gold should have translated to more people selling their scrap gold, but it would seem there are less cash-strapped people. This might have to do with the strong economic growth in most Western Countries. Brexit has the UK worried, the U.S Trade war, The U.S withdrawing from the Paris Climate Accord spells impending disaster, but that trouble hasn’t been evident yet and maybe people aren’t worried about buying gold to store their wealth.

Europe and America might have gotten used to the story of gold being near depletion which would have made scrap gold dealers less sensitive to the gold price. For dealers, the spot price of gold might be too high for launching a concerted effort to get as much gold as they can. The decline in demand for new bullion coins in the U.S has given rise to the secondary market where coins are being circulated amongst collectors. This trend has continued on to the second quarter of 2018 despite the rising gold price. More gold coins are sold at auction or traded amongst collectors. This is the gold that mostly goes unaccounted for. Gold that is sold by gold dealers, refineries and mints is easy to account for but the amount of gold that has been moved around from dealers to dealer and then to investors is based on speculation. Is it that the industry has enough mined gold to fulfil all that is required and there is supplementary gold needed in the form of recycled gold to meet demand?. Maybe the demand for investment bars and coins has declined but the demand for gold in industrial use has not subsided.

 

The US Mint has reported sales levels they have not seen since 2007. Germany, on the other hand, has increased its gold consumption. It has managed to move from 12th place to 4th place in the table of gold consuming nations. Germany’s household demand for investment gold has risen to 92% between 2013 and 2017. The global average during this period was close to 33%. However, in the first quarter of 2018, it too experienced a dip in demand. The gold market is holding out for this to change but there are so many factors that play into this, it’s hard to determine when everyone will reach a tipping point for things to start changing.

 

Sources:

  1. https://www.coinworld.com/news/precious-metals/2018/05/gold-demand-off-to-slow-start-in-2018.all.html
  2. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q1-2018

The Volcker Rule and its Effects on the Precious Metal Industry

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Before moving on into the topic of how the Volcker rule affects the precious metal industry, it is crucial that the Volcker rule itself be understood first. The Volcker rule is basically a reformation act that restricts the banks in the United States from taking high risk investments, especially high risk investments that do not benefit the customers of the bank. In view of the major scandals involving banks using people’s money to make short term gains that saw profit flow into the banks but not to the customers, but when things go wrong, the customers bear the burden of the loss.

In other words banks are prohibited from investing in short term or long term hedge funds, speculative markets that are highly risky and it also prevents banks from investing in the precious metals industry (gold bullion / silver bullion). Banks are currently actually looking for loopholes in the legislation rather than comply to it, but according to the legislators the loopholes do not exist. How this would affect the precious metal industry is multi tiered, as some analyst say that banks are the biggest buyers and sellers in the precious metal commodity trade industry and that they are the main ‘market forces’ applied through hedge fund managers and their absence would create a huge void in demand and drive prices down. On the other hand there are those who believe that the absence of these speculative strong forces would provide stability to the prices of gold as most of the trading done by these market forces are for short term gains and in retrospect most of the gold bought by them are never held fopr more than a few days.

Looking into the average investor who looks towards the shiny yellow metal as a safe haven to secure wealth, the absence of these speculative forces will actually bring about the true essence of the gold value and allow the average investor to sleep peacefully knowing that there are no hedge fund managers trying to manipulate the gold market prices. Many have applauded this move, especially the savers, as many have seen what has happened in recent years to big financial institutions that were financially ruined and in the process ruined many other lives of individuals who had trusted these financial institutions to keep their life saving safe.

The reformation brought about by the Volcker rule is expected to bring confidence back into the precious metal industry as smaller investors will no longer have to contend with big players who use other people’s money to fill their coffers. Nevertheless, prior to this there have been numerous other ‘so called’ rules that were supposedly supposed to protect the small people, however in light of what transpired during the global financial meltdown and other similar situations, how long this rule lasts before it is overwhelmed or manipulated by the powers that be would not be long, and those who want to place themselves within the safe zone amidst a financial crisis would typically be the ‘Average Joe’ with a fistful of gold.