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The Direct Economic Impact of Gold

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The Direct Economic Impact of Gold www.pwc.co.uk The direct economic impact of gold October 2013 www.pwc.co.uk The work carried out by PricewaterhouseCoopers LLP ("PwC") in relation to this report has been carried out only for the World Gold Council and solely for the purpose and on the terms agreed between PwC and the World Gold Council. The report does not constitute professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this report and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences to anyone acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it. © 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. The direct economic impact of gold Contents Foreword........................................................................................................................................................................1 Executive summary .......................................................................................................................................................1 Background....................................................................................................................................................................1 Key findings ...................................................................................................................................................................1 Scope of analysis and approach................................................................................................................................... 2 The supply of gold ........................................................................................................................................................ 2 Demand for gold ........................................................................................................................................................... 4 Extending the analysis ................................................................................................................................................. 6 Introduction.................................................................................................................................................................. 8 Background................................................................................................................................................................... 8 The gold value chain..................................................................................................................................................... 8 Scope of analysis........................................................................................................................................................... 8 Overview of approach and method.............................................................................................................................. 9 Report structure .......................................................................................................................................................... 11 The supply of gold .......................................................................................................................................................12 Introduction.................................................................................................................................................................12 Mine production ..........................................................................................................................................................12 Recycling of gold......................................................................................................................................................... 25 Demand for gold ......................................................................................................................................................... 27 Introduction................................................................................................................................................................ 27 Central bank purchases of gold.................................................................................................................................. 27 Investment .................................................................................................................................................................. 28 Gold fabrication and consumption............................................................................................................................ 29 Bar and coin ................................................................................................................................................................ 29 Jewellery ..................................................................................................................................................................... 32 Technology.................................................................................................................................................................. 33 Extending the analysis ............................................................................................................................................... 36 Appendix 1 – Glossary................................................................................................................................................ 38 Appendix 2 – Methodology........................................................................................................................................40 Introduction................................................................................................................................................................40 Supply of gold .............................................................................................................................................................40 Demand for gold ......................................................................................................................................................... 43 Contacts....................................................................................................................................................................... 49 PwC The direct economic impact of gold Foreword It is with great pleasure that I am able to introduce The Direct Economic Impact of Gold, a new independent report from PwC, commissioned by the World Gold Council. This report is both ground-breaking in scope and timely in its analysis. It addresses, for the first time, the direct economic impact of gold on the global economy, and does so in a way which is objective in stance and rigorous in its treatment of complex data. The report is unique in looking at an entire value chain, including gold mining, refining, and fabrication and consumption. It helps us understand the fundamental role that gold plays in advancing economic development and ultimately the needs of society. The scope of the report has been determined by the availability of data and therefore there are some limitations within the report. It details where additional research would improve understanding of the significant contribution the gold industry makes to households, communities and nations alike. If one were to add in the indirect value created by the gold industry, the value delivered would likely be significantly larger; indeed quantifying this “multiplier effect” would merit its own research report. This is a time of change for the entire gold industry. The mining sector is facing a barrage of converging challenges; increasing costs, ever higher expectations from a wide range of stakeholders and a gold price which could call in to question the viability of some projects and lead to a contraction in supply. Demand however is increasing, fuelled by; expanding middle classes in Asia, diversification of reserve assets by central banks and a growing desire for physical gold amongst many Western savers. In the midst of all this, and at a time when the ‘extractive’ industries are being widely scrutinised for their global impact, it is important to be reminded of how gold contributes so broadly to the global economy, ranging from foreign exchange earnings for gold-exporting countries to employment opportunities and tax revenues This study demonstrates this clearly; of particular note is the fact that the economic value generated has a direct and sustained impact on the local economies where gold production or consumption takes place. I believe that it is only on the basis of a more realistic and better rounded understanding of gold’s true impact on our global community that the gold industry can further develop and sustain effective partnerships with all our stakeholders. I hope that this research will contribute to the quality of this conversation and lead to further research and discussion. Randall Oliphant, Executive Chairman, New Gold Inc. and Chairman, World Gold Council
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