REPORT: Australia Gains Control of Gold Mining Industry
Australian owned mining companies account for approximately 50 percent of gold mining operations in Australia, according to a recent report by mining consultancy Surbiton Associates.
The shift in control is contributed to foreign investors selling off their stake in Australian mines, giving local companies more control of the country’s $12-billion gold mining industry.
“When the gold boom started in the early 1980s, Australia’s control of its domestic gold mining industry was around 80 percent,” says Surbiton director Dr. Sandra Close. “However, around the turn of the new century, there was a spate of overseas takeovers when the Australian dollar was weak and Australian control fell below 30 percent.”
The tide has changed with Australia climbing back, now owning 50 percent of Australian mines.
In the past year Canada’s Alacer Gold sold two of its mining operations to Australia-based Metals X and Northern Star purchased the Jundee mine from Colorado-based Newmont Mining.
“Several of the world’s largest gold producers have switched their strategy from chasing ounces to rationalization and cost reduction. This does not always sit easily in an Australian context as, unlike many other gold producing regions, Australia’s production comes from a considerable number of smaller mines, rather than a small number of larger mines,” said Close.
For years companies have held on to these Australian operations, viewed as long-term operations, as the amount of gold output contingent on the overall production schedule.
“So it looks great on paper, but the practicalities are such that much of our gold reserves are for the very long term. For a sustainable industry, we still need production from traditional primary gold deposits, and ongoing exploration is as vital today as it ever was,” Close added.
Australia is home to the world’s largest gold reserves.
Copper, iron ore surge as Chinese investors unleash demand
The reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 on Thursday.
In the wake of mounting evidence of inflation fuelled by higher raw materials prices, investors are also increasingly focused on when the U.S. Federal Reserve might start throttling back its emergency support.
Many banks say the rally has further to run, particularly for copper, which will benefit from rising investment in new energy sectors. Copper is at the highest in a decade, fueling bets it will rally further to take out the record set in February 2011. Steel demand is surging as economies chart a path back to growth just as the world’s biggest miners have been hampered by operational issues, tightening ore supply.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Commerzbank AG analyst Daniel Briesemann. “The decarbonization trends in many countries, which include switching to electric vehicles and expanding wind and solar power, are likely to generate additional demand for metals.”
Trading house Trafigura Group and several major Wall Street banks including Goldman Sachs Group Inc. and Bank of America Corp. expect copper to extend gains.
Copper rose as much as 1.6% to $10,108.50 a ton on the London Metal Exchange before trading at $10,080 as of 4:07 p.m. in London.
Benchmark spot iron ore prices rose to a record, while futures in Singapore and China climbed.
The boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.
Spot iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.
Erik Hedborg, Principal Analyst, Steel at CRU Group commented: “Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise. Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $50 /dmt to break even.”
Still, some analysts including Commerzbank’s Briesemann expect a short-term correction as metals become detached from fundamentals. There’s also a risk that China could engage in policies that may cool demand for iron ore and copper.
The metals rally has boosted concerns about short-term Chinese demand. Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Tin climbed as much as 2% to $30,280 a ton on the LME, boosted by rising orders for the soldering metal. Tin is at the highest since May 2011, with a 48% gain this year making it the best performing metal on the LME.