Australia’s GOLD INDUSTRY A Valuable Asset Australia’s GOLD INDUSTRY A Valuable Asset Contents 04 Gold: Sustaining prosperity 06 Utterly unique 10 Gold mining in Australia 18 A vital source of skilled, high wage jobs 21 Investing in communities 26 Investing in sustainability 28 Securing tomorrow’s prosperity 1st 2nd 3rd RESOURCES PRODUCTION EXPORTS Australia has 9,900 Australia is the world’s Gold is Australia’s third tonnes or 18% of global second largest producer. largest export industry. economic resources – the largest in the world. JOBS $291m + ROYALTIES 50,000 Royalties paid by the More than 50,000 jobs (direct gold industry in 2012-13. and related) were supported by the gold industry in 2011. 266t PRODUCTION Australia produced $15 .1b 266 tonnes in 2013. EXPORT EARNINGS Export earnings in 2012-13. WAGES Average wages in the gold The Value of industry exceed $140,000. $140k GOLD 4 Minerals Council of Australia GOLD: SUSTAINING PROSPERITY Today, the gold mining industry helps sustain our THE DISCOVERY OF national prosperity through exports, high-wage jobs, GOLD IN THE MID-19TH investment and tax and royalty revenues. Australia’s third highest export earner in 2012-13 (after iron ore CENTURY SPURRED and coal), the gold industry is also a vital source of economic activity in a number of regional and remote AUSTRALIA’S GROWTH communities. AND DEVELOPMENT. Australia is the world’s second largest gold producer after China, accounting for around 9 per cent of world production. Based on United States Geological Survey estimates, Australia has the world’s largest share of economic gold reserves at 18 per cent (Figure 1).1 More than a rich seam from our past, Australia’s gold industry is a national asset worth valuing, now and in the future. Australia’s Gold Industry. A Valuable Asset. 5 FIGURE 1 Australia’s gold industry in global perspective (2013) Source: Geoscience Australia, United States Geological Survey, Thomson Reuters GFMS Production 9% 6% Australia South Africa 8% Russia 42% Chile 2% Indonesia 3% United States Brazil 7% Peru China 3% Rest of the world 6% 14% Economic reserves 18% Australia 31% South Africa Russia Chile 11 % Indonesia United States Brazil Peru 3% 9% China 4% Rest of the world 5% 7% 6% 6% 6 Minerals Council of Australia FOR CENTURIES, GOLD’S SCARCITY, DURABILITY AND UTTERLY DECORATIVE BEAUTY HAVE MADE IT A UNIQUE AND UNIQUE HIGHLY–PRIZED METAL. Australia’s Gold Industry. A Valuable Asset. 7 FIGURE 2 The world’s gold inventory Sources: United States Geological Survey, World Gold Council Other 20.8m 24,800 tonnes (14%) Official sector 30,100 tonnes (17%) Jewellery 84,600 tonnes 20.8m (49%) Private investment 34,700 tonnes (20%) Below ground stocks 52,000 tonnes Gold has fulfilled multiple roles including as an item of investments. While gold mine production averages of ornamentation (often with religious and cultural about 2,800 tonnes annually, more than half that quantity significance), a medium of exchange and a store of is traded daily on the global market in various forms. wealth, especially in times of economic uncertainty. And it The World Gold Council estimates that more than has continued to develop new and diverse technological 174,000 tonnes of gold has been produced since gold applications based on its unique physical properties. mining began and that 96 per cent of this total still It’s estimated that about half of all gold in above- exists in some form above the surface of the earth.2 On ground stocks exists in the form of jewellery, with pure this basis, if the global stock of gold was amalgamated gold denoted as 24 carat. Industrial uses (including in it would form a 20.8 metre cube, with another 52,000 electronics, medical and dental applications) reflect its tonnes of gold in underground stock (Figure 2). high electrical conductivity, malleability and ductility. A distinguishing characteristic of the gold market is The high level of liquidity in the gold market is one factor the range of factors that drive market behaviour. The underpinning the attraction of gold as an investment geographical diversity of mine production is considered and source of wealth preservation, including for small a key factor contributing to lower price volatility relative investors. Over time, new products and ways to access to other commodities, while the sheer size, depth and gold – such as the rise of Exchange Traded Funds – liquidity of the gold market rank highly not just against have presented increased opportunities for individuals as other commodities, but compared with other asset well as institutions keen to hold gold as part of a portfolio classes (including sovereign debt). 8 Minerals Council of Australia FIGURE 3 The gold value chain Supply Mine production Recycled gold Artisanal production Net producer hedging Official sector sales Demand factors Gold market fundamentals have undergone significant electronics being the largest source of gold demand change over the last three to four decades. Gold in this category. jewellery still constitutes the largest single source of The profound structural shift that has seen emerging global demand, though jewellery-related demand has economies account for a large and growing share of fallen from almost 80 per cent of total demand a decade global economic activity has had major implications ago to around 50 per cent. Investment has once again for the gold market. The rising economic power of become a more prominent component of demand. countries such as China and India has diminished the The shift toward investment demand gained added traditionally dominant role played by North America momentum following the Global Financial Crisis in 2008, and Europe in shaping gold market dynamics – as gold came to be seen as an increasingly attractive whether from jewellery demand, central bank activity “safe haven”. or investment demand. For example, the share of The share of demand accounted for by technological, jewellery-related demand from the Indian subcontinent industrial and mechanical uses of gold has remained and East Asia is estimated to have risen from 22 per stable over the last decade at about 10 per cent, with cent in 1980 to about 66 per cent in 2010. Australia’s Gold Industry. A Valuable Asset. 9 FIGURE 3 The gold value chain Source: World Gold Council Demand Fabrication Consumption Jewellery Watches & jewellery retail Retail of electronic devices, Technology appliances, medical services etc Investment • ETFs and similar products • Bar and coin Gold retailers & financial services Official sector purchases (central banks) Supply dynamics On the supply side, mine production has tended to Global mine production, after falling from 2,625 tonnes constitute 60 to 70 per cent of total supply, with recycling, in 2002 to 2,429 tonnes in 2008, has risen strongly net central bank sales and net producer hedging forming in recent years and is estimated at 3,022 tonnes in other supply components to varying degrees. In recent 2013. According to Australia’s Bureau of Resources years, the official sector (central banks) has been a net and Energy Economics (BREE), global production will source of demand, as European central banks have slowed continue to rise to almost 3,200 tonnes in 2018.3 their net sales of gold reserves and emerging market More so than many other metals, gold production central banks have become a net source of demand. is widely distributed throughout the world with no A notable shift in the last decade has been the comparative country accounting for more than 15 per cent of global rise in recycled gold as a source of supply, mostly from production. China is the world’s largest gold producer the developed economies of Europe and the United (14 per cent), followed by Australia (9 per cent), Russia States. As almost all the gold that has ever been mined (8 per cent), the United States (7 per cent) and South still exists in one form or another, recycled gold comprises Africa (6 per cent).4 a larger share of supply than for any other metal. 10 Minerals Council of Australia GOLD MINING IN AUSTRALIA Apart from driving significant population growth and THE FIRST GOLD RUSH IN economic development, it unleashed powerful forces 1851 WAS A DEFINING EVENT that left an indelible mark on the nation’s social and political fabric (Box 1). IN AUSTRALIAN HISTORY. Today, gold is mined in all Australian states and the Northern Territory (Figure 4). Western Australia accounts for around 71 per cent of Australia’s gold production, followed by New South Wales (11 per cent), Queensland (6 per cent) and South Australia (5 per cent).5 Gold is the primary output of about 75 operations in Australia with many drawing resources from two or more deposits and from both open-cut and underground mining operations. Several mines also produce gold as a by- product from the production of other commodities.6 Australia’s Gold Industry. A Valuable Asset. 11 FIGURE 4 Major Australian gold mines (2012) Source: Geoscience Australia DARWIN Ernest Charters Towers Tanami Henry Mount Carlton Telfer Plutonic Mount Rawdon Wiluna Project Jundee-Nimary Agnew Moolart Well Hill 50 - Galaxy Pits Garden Well - Erlistoun BRISBANE Granny Smith Prominent Hill Sons of Gwalia Sunrise Dam Challenger Olympic Dam Frog’s Leg Kanowna Belle Edna May Kalgoorlie (Super Pit) Peak Mines Project PERTH HJB (Hampton-Boulder-Jubilee) St Ives Northparkes Boddington Norseman Project Cowal Ridgeway Navajo Chief ADELAIDE Cadia Hill SYDNEY CANBERRA Fosterville Project 0 750 km MELBOURNE Major Australian gold mines Rosebery (operating with in situ resources of gold >30 t) HOBART Resources The Yilgarn Craton in Western Australia is Australia’s Forsterville in Victoria (quartz-vein related), Cadia in premier gold province with major Archean greenstone- New South Wales (porphyry gold copper) and Mount hosted deposits such as Kalgoorlie, Granny Smith and Carlton in Queensland (epithermal).7 Boddington.