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TORONTO – Despite plummeting gold prices, global production of the precious metal reached a record in 2013 for the fourth-consecutive year.
The result appeared in a report on Thursday from the precious metals consultancy Thomson Reuters GFMS. In addition to dispelling theories about “peak gold,” the study shows that gold miners are churning out the metal at a furious pace, even though they are facing severe margin pressure.
Total gold mine supply reached 2,982 tonnes last year, according to GFMS estimates, up 4.1% from 2012. But Rhona O’Connell, head of metals research and forecasting at GFMS, said the final number will likely be higher as fourth quarter production guidance from miners has been stronger than expected.
There are a few explanations for this uptick in production, which seems counter-intuitive in such a tough market.
According to GFMS, many mines boosted their output. In some cases, miners may be processing greater quantities of ore in order to maintain revenue and contain costs at lower gold prices. Additionally, some companies may be focusing on the higher-grade portions of their mines. That can result in higher production and lower costs in the short term, but it is not sustainable.
At the same time, several large new mines either just entered production or are slowly ramping up. Management teams are likely to do everything they can to keep these new mines running after spending so much time and money to get them started, even if they are struggling to break even.
Regardless, GFMS does not think this supply growth is sustainable in the current low price environment. Ms. O’Connell said production is likely to decline in 2014.
“We’ve already seen a slowdown in the pipeline of new projects, because the gold price has meant they’re not viable or only marginally viable,” she said in an interview following a presentation in Toronto.
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