While global gold mine production was at best flat in the first half of 2012, average total cash costs jumped 19% to a new high of $727 per ounce.

According to Thomson Reuters GFMS’s Gold Survey 2012 Update 1, some of the reasons behind the hiatus in production are declining grades across the industry, construction and commissioning delays and slower than expected ramp-ups of output at a number of properties. Added to this, the group said, were exogenous factors like geotechnical problems, extreme weather and labour strikes.

But, the consultancy says, “These are not the only headwinds producers have to face. The relative stagnation of the gold price, coupled with further rises in production costs, has seen producers’ cash margins eroded by 16% over the past nine months, while upward revisions to capital expenditure forecasts will place additional pressure on free cash flow going forward.”

And, while higher gold prices year on year have seen average producer margins rise 11% over the period, GFMS is quick to point out that “on a quarterly basis margins have in fact declined for the last three quarters.”

Continued cost inflation and falling prices also meant that average cash margins have fallen sharply from above $1000/oz in Q3 2011 to just below $900/oz in the second quarter of 2012.

If one adds to this the 6% jump in depreciation and amortisation costs to $203/oz then GFMS’s proprietary ‘all-in cost’ metric which is designed to reflect the full marginal cost of mine production rose to $1,050/oz during the period.

Looking across the various gold mining regions of the globe, Africa topped the production lists with the largest regional gain over the period – and this despite a 5% fall in production from South Africa. While, South African production fell to 93 tonnes on the back of a number of Section 54 safety stoppages and lower mill head grades, the continent as a whole saw production increase 9 tonnes to 297 tonnes.

The US produced 112 tonnes of gold over the half year, 4% less than the comparable period last year with the heaviest falls coming from the Goldstrike and Bingham Canyon mines, while Canadian production also declined, albeit only slightly, coming in at 52 tonnes for the period.

Peru and Mexico recorded the second and third strongest increases in output growth, each of them adding 5 tonnes to their production for the period. This helped the region record an overall increase despite losses in Argentina and Guatemala.

Australian gold production fell 5% to 123 tonnes on the back of poor output at a number of operations, while, in Asia, Chinese mine production grew by 13 tonnes, or 5% year on year.


While growth has slowed in 2012, GFMS does not believe that the world has reached peak mine supply. Rather it expects, “a broad trend of growth to continue into 2013, albeit at a slower rate than we had expected 12 months ago, as gold miners continue to progress current development projects.”