Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
A report by Fitch Solutions states that the period 2018-2022 is seeing a growth in gold production because slightly higher prices and stronger company financials are encouraging greater mine investment.
“We forecast global gold production to increase from 104moz in 2018 to 115moz by 2022, averaging 2.6% annual growth,” the document reads.”We expect gold prices to continue to head higher, averaging USD1,275/oz in 2018 and USD1,400/oz by 2022,” it adds.
According to the market researcher, Russia will lead the rising trend with a 4% growth this year, up from 0.8% last year.
The Natalka project is located in the Far East of Russia and has 16 million ounces of Proven and Probable Reserves. Photo by Polyus Gold.
In the longer term, Fitch says Russian gold production will continue to grow because there are some 19 projects due to come online. Among them is Polyus Gold’s Natalka project, which should be fully operational by the end of the year with a production capacity of 420-470koz per year.
“We expect Russian gold production growth to accelerate in 2018 as domestic demand for the precious metal is buoyed by the prospect of further western sanctions on state-banks, which will respond by increasing their reserves of gold,” the market researcher says.
When it comes to the US, Fitch forecasts steady production growth, which should rise from 8.0moz in 2018 to 8.6moz by 2027.
The report states that the drivers behind the hike are improving gold prices and both greenfield and brownfield projects with junior miners taking the lead.
Together with the juniors, big player Newmont (NYSE:NEM) is expected to take a major role in the US output growth since it achieved commercial production at the Twin Creeks expansion project back in July. The Nevada operation will add 30-40koz annually between 2018 and 2022.
In Australia, on the other hand, Newmont expects 2018 production to be 1.5-1.7moz.
This, together with OZ Minerals’ development of the massive Carrapateena copper-gold project, will help grow output from 10.1moz in 2018 to 13.0moz by 2027, which is an average 3% of annual growth.
On the negative side there is China whose gold production Fitch sees stagnating over the coming decade, as declining ore grades, tightening environmental standards and miners focused on acquiring low-cost assets abroad limit the country’s project pipeline.
“We forecast an average annual growth rate of 0.2%. This represents a notable slowdown compared to average annual growth of 5.5% over the previous 10-year period,” the report reads.
Despite this and the fact that in 2017 Chinese gold output had already declined by 8% y-o-y to 14.8moz, the country is expected to remain the largest global producer of gold ore.
3 Comments
Mark
What about a reduction in production as a co-product, especially if we see a global slowdown?
Chris
Skeptical. Even if you take the growth projections at face value (which don’t seem to account for attrition), the chart shows +2 Moz additional production from the top 6 producing countries globally from 2017 to 2022. Where will the other 7 Moz come from?
WN
Skeptical as well. Please send link to the report.