6 February, 2018

Decline in recycling drove total supply 4% lower to 4,398t, as mine production crept to new high in 2017

  • Mine production rose fractionally to 3,268.7t in 2017, the highest annual total in our series
  • 2017 saw net de-hedging of 30.4t, the first year of net de-hedging since 2013
  • Unusually high recycling levels in 2016 were the main cause of a 10% y-o-y decline in 2017, as recycling activity normalised
Tonnes 2016 2017 YoY
Total supply 4,590.9 4,398.4 -4%
Mine production 3,263.0 3,268.7 0%
Net producer hedging 32.8 -30.4 -
Recycled gold 1,295.1 1,160.0 -10%

Mine production

Mine production finished 2017 by falling 2% y-o-y to 833.1t in Q4. This resulted in overall annual mine production of 3,268.7t – fractionally higher compared to 2016 – and the highest annual total in our records. New mine starts in recent years have mostly served to fill the gap left by production losses elsewhere, which has led to a relative plateauing in global output.

Familiar issues in China and Tanzania continued to impact production in Q4. In China – the world’s largest producer – Q4 saw another y-o-y decline; national production dropped 10%. Provisionally, 2017 output is expected to be 9% lower than 2016, only the second annual drop in production since 1980. Stricter environmental regulations – relating to cyanide in tailings – imposed earlier this year resulted in the closing of some marginal operations in 2017, negatively impacting overall output. One of the key messages in President Xi’s report at China’s 19th Communist Party Congress was the implementation of the strictest possible environmental protections. Tanzanian mine production fell 15% y-o-y in Q4. The ongoing concentrate exports ban – introduced in March – continues to impact output from Acacia Mining’s Buzwagi project, while the company is also in the process of reducing operations at its primary Bulyanhulu project to help manage losses.

Several other jurisdictions also saw declines. The y-o-y change in Q4 production in the United States, Brazil and Mali were all affected by comparison with a high base period in 2016.

Output from Russia saw a y-o-y increase in Q4. The quarter also saw the start-up of the significant Natalka project located in the Magadan region. The project began commissioning in September and announced in December that it had poured its first doré. While the project is still in the early stages of production, Polyus expect this will significantly boost the company’s, and Russia’s, production in coming years.

In Indonesia, the mining of higher grade ore at Grasberg – the country’s largest mine – helped boost Q4 mine production by 11%. The mining of higher grades is likely to persist into 2018. In Canada, the Hope Bay (Q1 start) and Brucejack (Q2 start) projects, as well as Q4 start-ups Rainy River and Moose River, contributed to a 5% increase in Q4. Several West African start-ups – Fekola and Yanfolila (Mali), and Houndé (Burkino Faso) – also entered production towards the end of 2017.


Mine production growth continued to slow

GDT FY 2017 Supply - Chart: Mine production growth continued to slow

Source: Metals Focus; GFMS, Thomson Reuters; World Gold Council

Data as of

Net producer hedging

Total net de-hedging in 2017 reached 30.4t, bringing an end to three consecutive years of modest net hedging. In Q4, gold miners completed 15t of net de-hedging;1 the overall global hedgebook now stands at around 222t. As with previous quarters, fresh gold hedges were tactical in nature, mainly established to secure project cashflow, project financing, or high local gold prices.

In October, Westgold Resources announced an increase in its short-term hedgebook of 40,000oz to lock in higher local prices. In November, Gold Road – which is developing the Gruyere gold mine in Australia – announced that it had entered into forward agreements which hedged 200,000oz to secure a portion of the mine’s future production. And in the same month, Resolute Mining announced it had agreed to hedge 72,000oz of output, to fund the expansion project at its Ravenswood gold mine. This follows forward sales of 84,000oz in September to help fund development of the Syama mine in Mali.


Gold recycling activity spent much of 2017 normalising after an impressive 2016. Despite the gold price performing relatively well in many currencies throughout 2017, the annual supply of recycled gold fell 10% to 1,160t, from 1,295.1t in 2016. After recycling responded with vigour to the stellar price increase in the first three months of 2016, it was believed that 2017 would likely struggle to compare favourably.

Q4 was the only quarter which saw a y-o-y increase in recycling during 2017: the 276.6t sold back by consumers was 8% higher than the same period in 2016 – which was negatively impacted by a significant price drop and the shock demonetisation in India.

East Asian and Middle Eastern markets drove declines in recycling during 2017. Recycling activity in 2016 – boosted by higher local prices on the back of currency weakness – was particularly high in Indonesia, Turkey and Egypt. This also made subsequent price levels in 2017 appear less attractive to consumers open to selling, contributing to the relative weakness in the y-o-y comparison. Political tensions across the Middle East also spurred consumers to hold onto gold rather than cash in.

In Western markets, the relatively strong performance of gold in US$ terms supported recycling levels in the United States. But gold’s weaker price performance in euro terms meant that European recycling fared less well. In the UK, recycling activity continued to re-adjust in 2017, after jumping in response to the Brexit referendum in 2016.


  1. Q3’17 has been revised from -10t to 8.3t, owing to the incorrect omission of hedges by Yamana Gold (285,000oz) and Teranga gold (131,000oz).

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