Extreme Weather Down Under Impacts Gold Production & Pricing

Friday, 30 May 2014
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Published in Gold Investing
Extreme Weather Down Under Impacts Gold Production & Pricing Wikimedia.
Australia’s gold production in the first quarter of this year declined by 7% below that of the previous quarter, according to Surbiton Associates, a consultant to the mining industry.


This appreciable reduction in output (equivalent to five metric tonnes) resulted in severe storms in sectors of Western Australia. The bad weather forced a number of mines to reduce ore output and curtail ore transportation in the first quarter, according to Surbiton Associates director Dr. Sandra Close. The retarding effect of wet weather on mine production due to cyclones is a familiar occurrence early in the year. But despite the 7% production decrease this quarter over the last, overall mine production for the year was 8% in excess of last year’s production rate.

Mines ordinarily maintain lower grade ore stockpiles as a backup in the event of bad weather, so that most mines can be kept running at or close to capacity. The largest producing activities for the first quarter were those of Newmont Mining's Super Pit, a joint venture of Newmont and Barrick Gold.

China is flexing its muscle — and wants more influence than London and New York over the price of gold.

Although America’s growth and development is tied to the California Gold Rush in the mid-19th Century, Australia is beset by its own yellow metal ethos. It saw a shock to the system when, in 1997, the then Federal Government treasurer Peter Costello sold off two thirds of Aussie gold reserves. For nearly 100 years, South Africa had reigned supreme as the world’s primary producer. China has now ascended to that role, leaving Australia as the number two producer. Since Western Australia is responsible for 75% of the continent’s gold production, any decline there due to bad weather is, in effect, world news.

Meanwhile, China has asked certain banks and gold producers to participate in a global gold exchange. As the world’s largest producer of gold, China is flexing its muscle and wants more influence than London and New York over the price of the yellow metal.

Stay tuned. These developments in Australia and China could conceivably have a steroid effect on the price of gold in the near future.

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