Gold mining is a global business with operations on every continent, except Antarctica, and mines of widely varying types and scale. South Africa produced roughly two thirds of all production with an annual mine output of around 1,000 tones. This has since diminished to 168 tones (in 2015) and the country is now ranked sixth amongst gold producing countries. The gold supply has become less geographically concentrated and therefore, overall, more stable. Since, a greater number of countries have emerged as substantial gold producers over recent decades.
Asia Pacific is the leading producer as well as consumer of gold with major consumption in South East Asian countries. High growth in India, China and South East Asian countries coupled with rising disposable income of the general population is the major driver for the growth of the market, in the region.
Global gold reserves were 56,700 tones (t) as of January 2016, with Australia accounting for the largest share with 9,100t or 16% of the total, followed by Russia with 8,000t (14.1%), South Africa with 6,000t (10.6%), the US and Indonesia each with 3,000t (5.3%), Peru with 2,800t (4.9%), Brazil with 2,400t (4.2%) and the remainder by other countries. Gold reserves in Russia are mostly located in the Far East and Krasnoyarsk districts. The Witwatersrand basin remains the largest gold deposit basin in South Africa.
Gold is a precious metal, mainly used as jewellery and for investment purposes globally. Gold is considered as a safest bet for investment in times of high inflation with currency fluctuations.
Rising prices are expected to be a major factor driving the global gold market as more and more consumers are purchasing gold as a mean of long terms investments. Further, political instability and confidence over bullion, as a secure investment with high returns, aid in generating demand for gold. The diverse demand for gold is for, jewellery, technology, and by central banks and investors.
Further, industrial demand for gold especially in the electronics industry is expected to boost market growth in Asia Pacific. China is leading the market and is projected to increase its consumption to aid its high growth. The Chinese middle class urban population with rising disposable income has also increased investment in bullion as a quickly liquefiable asset substituting savings in the banks. Europe is the fastest growing region in terms of gold production with major production from Russia. Leading gold producing countries in the world include Australia, Brazil, Canada, Indonesia, Mexico, Peru, Papua New Guinea, Russia, the US, and Uzbekistan.
Global gold supply is a mixture of mined gold, scrap recovery and central-bank supply. More than half of gold supply worldwide comes from mined gold. China is the largest producer of mined gold. It overtook South Africa in terms of gold production volume in 2007. The annual total supply of gold has averaged around 4,000t over the last 10 years. Where, total mine supply- which is the sum of mine production and net producer hedging, accounts for two thirds of total supply. Recycled gold accounts for the remaining third.
The sources of mine production have become as geographically diverse as gold demand. China was the largest producer in the world in 2015, accounting for around 14 per cent of total production. Asia is as a whole produces 23 per cent of all newly-mined gold. Central and south America produces around 17 per cent of the total, with North America supplying around 16 per cent. Around 19 per cent of production comes from Africa and 14 per cent from the CIS region.
The gold mining industry faces few challenges, including cost pressures, lack of substantial discoveries and a reduced project pipeline. This is likely to see production revert to its longer term levels. Thus, the concept of ‘Responsible Mining’ must be considered. Where, when produced in conformance to high social, environmental and safety standards, gold provides employment opportunities, improved infrastructure and tax revenues. It can also drive foreign direct investment and generate foreign exchange.
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