China consolidates position as World No. 1 gold miner
China's annual gold production continues to grow comfortably maintaining its position as the world's biggest gold miner assuming official statistics tell the full picture - which they may not!
Posted: Wednesday , 14 Mar 2012
The most recent figures from China's Ministry of Industry and Information Technology note that China, already the world's No. 1 gold miner since 2007, continued its dominance in world gold production with output rising last year by 5.89% to 360.95 tonnes. The most recent statistics also show that the country's gold mining sector continued to expand in January with a rise of about 3.69% from the same month a year ago, suggesting that we may well see further annual gold mine output growth in 2012.
China's ever-increasing gold output though is still nowhere near the country's huge appetite for consuming gold which rose to perhaps some 800 tonnes in 2011, although such figures tend to be speculative in nature as the officially reported statistics may not show the true picture. There does seem to have been a fall-off in demand however at the end of last year and in the first two months of 2012 with official figures for imports through Hong Kong - the main import route - seeming to show a significant decline over the same period a year ago.
But there are always question marks over Chinese statistics which may well be presented to suit the State (something which even countries with a free market can do with some of their ‘official' figures in these days of politically-motivated spin.) What is an uncertainty over Chinese production figures is it is not clear whether these include byproduct output from the country's big toll base metals smelting and refining sector, and whether output from a myriad of small gold mines, some being technically illegal operations, which fall outside direct state control is also included.
Likewise on the import side it is still unknown what proportion of gold imports, if any, does not come in through Hong Kong, which seems to be the only route for which possibly reliable statistics are available.
It has long been suspected that China's official gold reserve picture also substantially under-represents the true picture. There is perhaps consensus speculation that the country's official gold output is all going into state coffers and the possibility that some of the stated imports are too, but any such reserve increases are not announced on any regular basis. We won't really know the true picture (if then) until China announces new official gold reserve figures which could yet be some years away when it deems it to be the right moment to do so. This year, next year, sometime, never?
Meanwhile official gold production figures are beginning to come in from other major gold producing countries. South Africa's output seems to be continuing to decline year on year and latest figures from Statistics South Africa show further sharp production declines in December and January over the same months a year previously. U.S. production last year was also seen as down, but official statistics not yet available.
World No. 2 gold miner, Australia, also showed a small fall last year with output estimated at 264 tonnes as opposed to 266 tonnes a year earlier.
Ironically, higher gold prices, which have been seen year on year for the past decade, can lead to production reductions as mines are able to mine lower grade ore profitably and extend mine lives. If they do not expand milling capacity - which tends to be an expensive capital exercise and thus frequently not a consideration- then actual output will fall as a consequence of lower grade ore being milled at the same throughput rates. Higher prices may still mean higher profits despite lower production.
Similarly developing mining operations may be able to lower cutoff grades which again can mean lower metal output than originally projected.
iPad Version: Picture - An employee arranges gold jewellery in the counter as her arm is reflected in the mirror at a gold shop in Wuhan: REUTERS/Stringer China