Global mine production grew 2% y-o-y in Q2, reaching 882.6t. This is a record level of global output for a second quarter and follows on from a Q1 record of 847.5t. Total H1 mine production now stands at 1,730.2t, 1.1% higher than H1 2018. As we noted in our previous Gold Demand Trends report, this represents a very strong start to the year.
Some key producing nations saw significant gains in Q2. Canadian and Russian gold output saw a 9% increase y-o-y as both benefited from new projects. In Canada, the continued ramp-up of Brucejack, Rainy River and Moose River, as well as Meliadine coming online, boosted quarterly production. In Russia, the ramp-up of the Natalka project – in addition to increases from several other mines, particularly in the eastern region of the country – pushed aggregate output higher. The US saw a similar increase in gold production (+9% y-o-y). Higher output from Carlin and Cripple Creek helped offset lower expected output from Goldstrike and Cortez. Australian gold production (+6%) was boosted by stronger output from several mines, while Kazakhstan (+18%) benefited from the continued ramp-up of the Kyzyl project. In West Africa, Ghana – the continent’s largest producing nation – saw a 6% y-o-y increase in production, primarily from Ahafo and Akyem.
China, South Africa and Indonesia saw continued declines. Chinese gold production registered another quarter of y-o-y declines. National output fell 4% y-o-y as the stricter environmental regulations imposed in 2017 continued to impact the industry – albeit to a lesser degree. South African production fell 12% y-o-y, disrupted by industrial action. Output from Beatrix, Kloof and Driefontein was cut significantly due to strikes that began in November 2018 and only drew to a close at the end of April. In Indonesia, national production fell by 48%. At Grasberg, the exhaustion of higher grades in the final phase of the open pit and the subsequent switch to underground mining continued to depress volumes relative to 2018. Batu Hijau remains constrained by Phase 7 open pit expansion, as well as by copper concentration export limits and the lack of local smelting capacity.
Weaker currencies help improve miners’ margins. Weaker producer currencies helped pushed non-US dollar costs down, boosting miners’ coffers in key mining nations such as South Africa, China, Australia, Russia and Ghana. An increasing gold price – especially in key producer currencies – was still more advantageous, pushing margins higher. This puts the industry in a reasonably healthy position.
Net producer hedging
Net de-hedging by gold miners in Q2 reduced the global hedge book by 10.5t: it was estimated to stand at 209t at the end of June. Y-t-d, net de-hedging totalled 8.3t.
Modest levels of hedging despite the higher gold price. Q2 was marked by an increasing gold price and weakening producer currencies. As a result, the gold price in a range of currencies hit multi-year – and in some cases record – highs.