Gold

Alan Whitaker (alan.whitaker@ga.gov.au)

The principal uses for gold (Au) are as an investment instrument for governments, central banks and private investors, with jewellery accounting for most of its annual usage. The main industrial use of gold is in the electronics industry, which takes advantage of gold's high conductivity and corrosion-resistance properties and small amounts are present in most modern electronic devices. Gold is used also in dentistry because gold alloys are strong, resistant to tarnishing and easy to work.

Demand for gold has exceeded world mine production for many years and has necessarily relied on recycling, sales by investors and, until recently, sales by central banks. Over much of the past two decades the central banks have sold down their stocks of gold. However, since early 2010, these banks have become nett purchasers of gold to augment their reserves. The World Gold Council has noted that, in particular, the central banks of many emerging nations are maintaining a high percentage of their reserves in gold.

The monthly gold price throughout 2011 started the year at US$1327 an ounce (oz) and finished at US$1531/oz, peaking briefly in August at US$1813/oz. The monthly gold price has been in a long-term upward trend since 2001. The gold price increased by about 80% in the 2001-05 period (from around US$260/oz to just over US$490/oz; Fig. 4), before increasing more rapidly to around US$970/oz at the beginning of the Global Financial Crisis (GFC) in early 2008. During the course of the GFC, the price receded to around US$800/oz before regaining to around US$900/oz by January 2009. From August 2009, the price resumed its steep ascent gaining a further US$910/oz to peak at about US$1810/oz in August 2011, or nearly doubling in only two years. With the re-emergence of the Euro-zone and other debt crises in 2011, the rise in the price of gold was again arrested, settling to US$1531/oz in December 2011, before re-adjusting to around US$1700/oz by mid 2012. During 2011, the exchange rate between the Australian and the US dollars has fluctuated between 0.97 and 1.04, yielding similar prices for the commodity in either currency. In summary, the gold price has increased about US$1440/oz since 2001 or around 650% in only 10 years. The sustained higher gold prices through 2010 and 2011 have coincided with expanded mining operations, the upgrading of mills and renewed operations at mines previously on care and maintenance, while exploration has been particularly focussed on re-assessing old mining centres with the view to re-establishing production in the short term.

Figure 4 is a line graph showing the monthly gold prices in dollars of the day for both United States dollars and Australian dollars from January 2000 to July 2012.

Figure 4. Monthly gold price in US$ and AU$ (dollars of the day) since January 2000.
(Source: Reserve Bank of Australia figures).

Resources

Australia's gold resources are mined in all States and the Northern Territory (NT) (Fig. 5). At December 2011, total Joint Ore Reserves Committee (JORC) code resources of gold were about 14 288 tonnes, an increase of 388 tonnes from 2010. Allowing for depletion of resources due to production (258 tonnes), new resources added to the national inventory in 2011 totalled 646 tonnes or about 21 million ounces (Moz). Since 2000, nett total JORC Code resources have risen by about 5480 tonnes or 60%, with rises recorded in all States and the NT (Fig. 6). Most of this rise is attributed to South Australia (SA) with a nett increase of 2320 tonnes, largely from the Olympic Dam deposit, while New South Wales (NSW) with 1340 tonnes and Western Australia (WA) with 972 tonnes also contributed significantly. The largest increase in delineated total JORC Code resources, including that lost to production during the same period, was in WA amounting to about 3050 tonnes.

Figure 5 is a map of Australia showing the names, locations and size of major gold deposits (i.e., those with more than 30 tonnes of in situ resources).

Figure 5. Australian gold deposits with significant resources.

Figure 6 is a stacked area graph of Australian gold resources from 2000 to 2011 as defined within the JORC Code categories.

Figure 6. Australian gold within JORC Code categories (from 2000 to 2011).

Australia's Economic Demonstrated Resources (EDR2) of gold are the largest for any country in the world and account for about 17% of the total as estimated by the United States Geological Survey. National EDR increased by 743 tonnes (24 Moz) to 9153 tonnes in 2011 with rises in all States and the NT. However, about 60%, or 443 tonnes, of this rise is attributable to the reclassification of Paramarginal Resources into EDR as a result of persistently higher gold prices and inferred increased economic viability of deposits. Western Australia continued to have the greatest share of EDR with 4058 tonnes, up about 490 tonnes or 1% on 2010 figures. South Australia with 2731 tonnes and NSW with 1645 tonnes contributed the second and third most to the national total. After WA, Queensland (Qld) saw the next largest growth in EDR of 108 tonnes increasing the State total to 482 tonnes for 2011. Between 2000 and 2005, the growth of EDR of gold was relatively flat and varied between about 5000 and 5500 tonnes. Since that time, and coincident with an increase of the gold price from US$430 to US$1700/oz, EDR has increased by about 3600 tonnes or nearly 70%. Currently, just under 50% of Australia's EDR of gold is derived from ore reserves as defined under the JORC Code (Fig. 7).

Figure 7 is a stacked area graph of Australian gold resources from 2000 to 2011 as defined within the National Mineral Resources Scheme.

Figure 7. Australian gold resources within categories of National Mineral Resources Scheme (from 2000 to 2011).

Notes: Economic Demonstrated Resources of gold comprising JORC Code reserves (blue) plus Measured and Indicated Mineral Resources deemed to be economic (green). EDR have grown from about 5000 tonnes to about 9000 tonnes since 2000. Paramarginal resources (yellow) have declined in recent years as a result of increasing gold price. Inferred Mineral Resources (orange) have remained relatively constant around 4400 tonnes since 2004 indicating a level of equilibrium between defining new resources and upgrading resources to JORC Code categories with greater certainty.

Around 70% of Australia's EDR of gold are contained in just 15 deposits. The four largest deposits - Olympic Dam in SA, Cadia East in NSW and Boddington and Telfer in WA - account for more than 50% of gold EDR.

Paramarginal Resources declined by 443 tonnes to 487 tonnes in 2011 or by almost 50%. The sustained substantial rise in the price of gold over the past few years has led to the reclassification of much of this resource category to EDR. Western Australia retained the largest amount of Paramarginal resources at 343 tonnes or about 70% of the national total, ahead of NSW with 49 tonnes.

Submarginal Resources rose by 15 tonnes during 2011 to approximately 135 tonnes. Again, WA had the largest share of this resource category with 96 tonnes while Qld was second with 20 tonnes. Combined Paramarginal and Submarginal resources accounted for 12 to 13% of total JORC Code resources for gold, between 2000 and 2008 however this figure dropped to only 4.3% in 2011 (Fig 7).

National Inferred Mineral Resources of gold rose by just 63 tonnes in 2011 to 4513 tonnes with the largest rises in SA (87 tonnes) and the NT (50 tonnes). Of some concern was the drop of 109 tonnes in WA to 1791 tonnes, or by 6% on its 2010 total. Inferred Mineral Resources are the dominant source material upgraded to JORC Code categories with higher geological certainty. National Inferred Mineral Resources rose from about 2700 tonnes in 2000 to about 4400 tonnes in 2005. Since then, the figures have stabilised in a much narrower range between 4300 and 4600 tonnes, indicating a degree of equilibrium between the definition of new Inferred Mineral Resources and conversion to resource categories with higher geological certainty. Western Australia with 1791 tonnes, or 40% of the total, and SA with 1158 tonnes, or 26% of the total, continued to maintain their dominance of the Inferred Resource category.

Accessible EDR

Australia's EDR for gold are essentially unencumbered with around 30 tonnes, or less than 1%, currently unavailable for exploitation. Deposits which contain gold resources that are unavailable for mining include Jabiluka, Koongarra, and Coronation Hill, which are all located in the NT.

JORC Reserves

JORC Code reserves comprise total resources in Proven and Probable Ore Reserves as defined in the JORC Code. In 2011, JORC Code reserves of gold amounted to 4131 tonnes, an increase of about 61 tonnes over the 2010 figure. These reserves accounted for 45% of national EDR (Fig. 7) and 29% of total JORC Code resources for 2011. While the majority of operating mines published JORC Code reserves, which were the basis for mining and production, anecdotal evidence suggests that a number of operations were mining from mineral resources of lower economic certainty, such as Castlemaine Goldfields Ltd (now LionGold Corporation) at Ballarat in Victoria (Vic). Periodically, some operations have also undertaken what is essentially trial mining because irregularly distributed, coarse gold has precluded the establishment of meaningful JORC Code compliant resource figures; as was the case in recent years for Ramelius Resources Ltd at the now completed Wattle Dam Mine in WA.

Exploration

Total mineral exploration expenditure, as reported by the Australian Bureau of Statistics3, increased by $1104 million to $3574 million in 2011. Expenditure on gold exploration increased for the year by just $85 million (up 14%) to $709 million and was overtaken by that spent on iron ore ($905 million), coal ($754 million) and combined base metals ($740 million; lead, zinc, silver, nickel, and cobalt).

Western Australia saw the greatest increase in expenditure on gold of about $87 million bringing its total for the year to $499 million or 70% of total gold exploration expenditure. The NT attracted an additional $26.9 million raising its total for 2011 to $73.8 million, second only to WA in expenditure on gold. In contrast, gold exploration expenditure dropped 35% to $34.4 million in Vic and by 17% to $40.3 million in NSW. Only minor changes in expenditure occurred in Qld, (up $1.8 million) SA (down $2.5 million) and Tas (down $0.8 million).

Reviewing annualised discovery costs per ounce yields highly variable results, partly reflecting differing lag times between company expenditure on exploration and the publication of new or updated resources. Furthermore, there is not a consistent relationship between exploration expenditure and the definition of new resources. Nonetheless, analysing these data over several years can minimise the influence of short term variability factors. Between 1992 and 2011, the annual discovery cost per ounce has varied between about $10 and $60/oz with a median cost of $26/oz. Between 2005 and 2011, the discovery price varied between $12 and $38/oz with a median value of $28/oz, only marginally higher than the longer term statistic. The one cautionary note to keep in mind is that these figures cover all gold deposits, including the large-tonnage copper-gold types, and not just the lode-gold types from which most production is currently sourced.

Expenditure on gold exploration is not differentiated in available statistics between brownfields (existing deposits) and greenfields (new projects). However, exploration expenditure for all mineral commodities on brownfields projects increased by $892 million to $2429 million in 2011, representing 68% of the total. At the same time, expenditure on greenfields projects increased only $191 million to $1144 million equating to a drop of 6% of its share of total exploration expenditure for all mineral commodities.

Production

The Perth Mint in WA is the sole refiner of gold in Australia, acquiring raw material from domestic mine production, recycled materials and from sources overseas. Total refined gold for 2011 amounted to 319 tonnes, of which about 308 tonnes, worth an estimated $15.9 billion was exported, a decrease of 22 tonnes on 2010.

While domestic mine production fell marginally by two tonnes to 258 tonnes in 2011, it remained significantly higher than the most recent low point of 215 tonnes in 2008, but still lower than the production highs of about 310 tonnes in the late 1990s. The spread of mine production between the States and the NT remained essentially the same in 2011 as in 2010, with 180 tonnes or almost 70% derived from WA (Table 8). New South Wales with 30 tonnes and Qld with16 tonnes contributed the second and third most, respectively, to the national gold mine production figures. Gold was a primary output of about 75 operations with many drawing ore from two or more deposits and/or from both open pit and underground sources. Nearly 20 additional operations produced gold as a by-product from processing other commodities such as in polymetallic base-metal deposits at Rosebery, Olympic Dam and Prominent Hill.

Table 8. Gold production by State/Territory for the past six years. Western Australia continued to dominate Australian production figures in 2011. Sources: Australian Bureau of Statistics and the Bureau of Resources and Energy Economics.
  2006
tonnes
2007
tonnes
2008
tonnes
2009
tonnes
2010
tonnes
2011
tonnes
Queensland 22 23 18 16 15 16
New South Wales 27 35 31 25 30 30
Victoria 6 6 5 8 7 5
Tasmania 5 4 5 4 4 4
South Australia 7 7 7 8 13 14
Northern Territory 14 17 15 10 10 9
Western Australia 165 156 134 152 181 180
Australia 246 248 215 223 260 258

Gold deposits can be grouped into a number of types with differing contributions to resources and production (Table 9). In 2011, lode-gold deposits of Archean age again accounted for the largest share of production at just over 50% of total mine production, or 134 tonnes, down 24 tonnes from that in 2010. Output from other copper-gold deposits including porphyry types increased by about 20 tonnes to 68 tonnes in 2011, almost off-setting the drop in production from the Archean lode-gold types, while production from the remaining types remained largely the same as 2010. Economic Demonstrated Resources for all the tabulated deposit types increased in 2011 with that of Archean lode-gold types increasing the most at 236 tonnes. However, this increase was partially offset by a drop of 71 tonnes in Inferred Mineral Resources. The EDR of Proterozoic lode-gold deposits saw the second largest gain of 193 tonnes, and, coupled with an additional 106 tonnes of Inferred Mineral Resources, saw the largest increase in total JORC Code resources.

Table 9. Economic Demonstrated Resources (EDR), Inferred Resources and mine production of gold (in tonnes) for 2011 categorised by deposit type. Also shown are category percentages of the respective total resource types, or mine production. Lode gold deposits of Archaean age dominate current mine production, but lower grade copper-gold deposits of various styles comprise the majority of Australia's current resources. Other Cu-Au/Au-Cu deposits include Telfer and Boddington in WA and the porphyry related mineralisation at Northparkes and Cadia in NSW. Surbiton Associates Pty Ltd is gratefully acknowledged for providing the data behind the mine production figures.
Deposit Type EDR –
Tonnes Au (%)
Inferred Reserves –
Tonnes Au (%)
Mine Production –
Tonnes Au (%)
Lode Au Archean 2396 (26.2%) 1539 (34.1%) 134 (51.9%)
Lode Au Proterozoic 623 (6.8%) 406 (9.0%) 18 (7.0%)
Lode Au Phanerozoic 257 (2.7%) 627 (13.9%) 19 (7.4%)
Iron Oxide Cu-Au 2483 (27.1%) 1247 (27.6%) 13 (5.0%)
Other Cu-Au/Au-Cu 3003 (32.8%) 457 (10.1%) 68 (26.4%)
Polymetallic base metals 260 (2.8%) 126 (2.8%) 4 (1.55%)
Other 131 (1.5%) 111 (2.5%) 2 (0.8%)

World ranking

Based on estimates provided by the United States Geological Survey (USGS) and adjusted for Australian figures (Geoscience Australia), world economic resources of gold increased by only 940 tonnes in 2011 to 52 740 tonnes. Australia, with EDR of 9153 tonnes, or 17% of world resources had the largest share, followed by South Africa with 6000 tonnes or 11% and Russia with 5000 tonnes or 9%. Also based on USGS figures, world mine production of gold increased by about 190 tonnes to 2700 tonnes in 2011. Australian gold mine production for the year amounted to 258 tonnes, or about 10% of the world total, and was ranked second behind China with 355 tonnes, but was ahead of the United States of America with 237 tonnes, Russia with 200 tonnes and South Africa with 190 tonnes. Over the past decade, world mine production has fluctuated between a trough of 2264 tonnes in 2008 and the current estimated peak of 2700 tonnes. Over the same period, consistent increases in China's output from 185 tonnes in 2001 to 355 tonnes in 2011 have been offset by declining production in South Africa from 402 tonnes to 190 tonnes, Canada from 160 tonnes to 110 tonnes and the USA from 335 tonnes to 237 tonnes. Estimated production rates for other countries over the same period are more irregular. Australia's mine production of gold peaked most recently at 310 tonnes in 1998, declining steadily to 215 tonnes in 2008, before recovering to 260 tonnes in 2010, still 50 tonnes below 1998 levels.

Industry Developments

Increased mineral exploration expenditure and sustained, though volatile, increases in the price of gold in 2011 over that in 2010 coincided with considerable activity in the gold industry. As in 2010, further assessment of deposits led to feasibility studies, and mines on care and maintenance brought back into production, while several processing plants and mining operations increased capacity. The industry also saw some mine closures as well operations experiencing lower gold production levels due to reduced ore volumes being processed or falling grades of mill feed.

The following selected announcements provide an overview of industry activities for 2011.

Queensland

Deutsche Rohstoff AG stated that production had commenced from its Georgetown operation.

Breakaway Resources Ltd released news that underground mining had recommenced at the Eloise Copper (gold) Mine, southeast of Cloncurry.

The Mount Carlton Project, south of Townsville, was given the go ahead by Conquest Mining Ltd (now Evolution Mining Ltd).

Ivanhoe Australia Ltd announced positive results from a study of the Osborne Copper Gold Project, south of Cloncurry and indicated that production would recommence in March 2012. The company also announced positive results of a scoping study of the Mount Dore Copper-Gold Project, also south of Cloncurry.

Xstrata advised of the commencement of underground mining at Ernest Henry, north of Cloncurry.

The Lorena Gold Project, east of Cloncurry, was purchased by Malachite Resources Ltd which also announced its intention to undertake a mining feasibility study of the project.

New South Wales

Positive feasibility study results were released for the Hera deposit, south of Cobar, by YTC Resources Ltd.

Kimberley Metals Ltd (now KBL Mining Ltd) completed refurbishment of the Mineral Hill copper-gold plant north of Condobolin and commenced production of concentrate.

Approvals were received by Cortona Resources Ltd for the development of the Dargues Reef Mine, south of Braidwood.

Victoria

AuRico Gold Inc. acquired the Fosterville Gold Mine, east of Bendigo, and Stawell Gold Mine through a takeover of Northgate Minerals Corporation and subsequently sold the operations to Crocodile Gold Corp.

Octagonal Resources announced the first gold pour from the recommissioned plant at Porcupine Flat, Maldon.

Morning star Gold NL announced that mining had recommenced at the Morning Star Gold Mine, Woods Point.

Mine production recommenced at Ballarat and Castlemaine Goldfields Ltd announced its first gold pour from the project.

Unity Mining Ltd closed its Kangaroo Flat Mine at Bendigo.

Tasmania

BCD Resources NL announced that the Tasmania Mine at Beaconsfield would close in 2012.

The Hellyer plant refurbishment was completed by Bass Metals Ltd and brought into production.

Frontier Resources Ltd intersected 17.6 metres at 10.8 grams per tonne of gold at the Stormont deposit in the Moina region, south of Burnie.

Northern Territory

Crocodile Gold Corp announced extraction of the first ore from the Cosmo underground development, northwest of Pine Creek. The company also announced positive results from a mine development study of the Maud Creek deposit, east of Katherine.

The feasibility study on the Mount Todd Gold Project by Vista Gold Corp continued.

Tanami Gold NL announced a mineral resource containing 535 000 oz of gold for the Groundrush deposit, northeast of Tanami.

A maiden resource containing 1.6 Moz of gold for the Buccaneer Porphyry, south of Tanami, was released by ABM Resources NL.

South Australia

Oz Minerals acquired the Carapateena copper-gold deposit, north of Port Augusta.

Rex Minerals Ltd released scoping study results for the Hillside iron-copper-gold deposit near Ardrossan, Yorke Peninsula.

Hillgrove Resources Ltd commenced production at Kanmantoo copper-gold-silver mine east of Adelaide.

Western Australia

Alacer Gold Corp announced a commitment to replacing the 1.2 Million tonnes per annum (Mtpa) Jubilee plant with a new 2.5 Mtpa plant to treat the increased resources at its South Kalgoorlie Operations.

Barra Resources Ltd announced the signing of a tribute agreement enabling the recommencement of production form the Burbanks Gold Project, Coolgardie.

Gold Road Resources Ltd reported a maiden resource containing 150 000 oz of gold for the Central Bore deposit located about 150 kilometres northeast of Laverton.

Integra Mining Ltd announced commissioning of the Salt Creek Mill, southeast of Kalgoorlie, was completed, and subsequently upgraded the plant by 25% to 1 Mtpa capacity.

KCGM commenced the Golden Pike cutback of the Fimiston Open Pit (Super Pit) at Kalgoorlie.

Millennium Minerals Ltd secured finance to underpin construction of the Nullagine gold project.

Nex Metals Explorations Ltd received approvals to recommence mining of the Butterfly Pit south of Leonora.

Phoenix gold released the results of a feasibility study of the Catherwood deposit north of Coolgardie and poured its first gold from stockpile treatment.

Ramelius Resources Ltd announced that mining would proceed at its Mount Magnet Project.

Range River Gold Ltd placed its Mount Morgans operation, west of Laverton, on care and maintenance as administrators were appointed.

Results of a positive feasibility study of the Garden Well deposit, north of Laverton, were released by Regis Resources Ltd.

St Barbara Ltd announced that production commenced at the King of the Hills underground mine north of Leonora.

Silver Lake Resources reported that the expansion of the Lakewood Processing Facility at Kalgoorlie to 700 000 tonnes per annum (tpa) was completed while the stage two upgrade to 1 Mtpa was in progress. The company also advised that ore production commenced from its Wombola open pit near Mount Monger, southeast of Kalgoorlie.

Tanami Gold NL completed a plant upgrade at Coyote to 350 000 tpa.

Endnotes

2 EDR is composed of total JORC Resources less Inferred Mineral Resources and those resources from other categories considered to be Paramarginal or Submarginal.

3 The figures for exploration expenditure on gold may only be considered an approximation as ABS assigns company provided expenditure on polymetallic deposits (e.g. copper-gold) to the first named commodity.