Australian Gold Mine Production on Track to Fall By Half Over Next 25 Years

Australian gold output will peak in just four years and then begin a steep decline, according to a report issued by a Melbourne-based industry adviser.

According to MinEx Consulting analysis reported by Bloomberg Business, Australian mine output will max out in 2021 and then fall by half into the mid-2050s, as aging mines close down.

A steep decline in Australia’s gold production will have a significant impact on world supply and lends credence to remarks made by the chairman of the World Gold Council during an interview at the Denver Gold Forum last month.

Randall Oliphant said he thinks the world may have reached peak gold. This means the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s. Oliphant said there are signs we’ve reached that point. In the near-term, he expects production to likely plateau at best, before slowly declining as demand rises, especially given global political risks and robust purchases by consumers in India and China

We’re not going to fall off a cliff in the near term, but in the same time it’s really hard to see how we’re going to produce enough gold to meet all this demand.”

Australia ranks as the world’s second-largest producer of gold. A steep falloff in production there would certainly push overall world output significantly lower, lending weight to peak gold speculations.

Recent production data also backs up the contention the world may have hit peak gold.  Mine production plateaued at 3,100 tons in 2016, equal to 2015’s output. And in the first half of this year, we saw sharp drops in mine output in both China and Australia, the world’s leading producers.

In 2016, Mining.com analyzed the data and concluded there are no more easy gold discoveries. In fact, the number of major gold discoveries continues to shrink. MarketWatch asserted that we’re heading for “an impending gold production cliff.” This seems to be the major issue facing Australian miners. According to Bloomberg Business, a steep drop in new discoveries as aging mines reach the end of their life is the key factor behind the predicted production dip.

The nation needs to act to boost future production from new discoveries, or risk ‘significant supply disruption in the medium-term,’ MinEx managing director Richard Schodde said in a study published Monday.”

When it comes to the gold market, most investors tend to focus on the latest economic news, geopolitical concerns, and central bank maneuverings. But it’s important not to forget the fundamentals – supply and demand. All of the signs point to shrinking supply in the future, even as demand increases. In fact, the gold industry may well be entering a long-term — and possibly irreversible — period of less available gold. As mining companies find it more difficult to pull gold out of the earth, it will mean less gold for refiners to produce for the consumer market. Remember, gold gets its value from its scarcity.

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Photo by: Calistemon