Gold Mine Production Drops in Q3 - WGC

Following a robust first half, mine production in the third quarter dropped over 1 percent year-on-year to 841t, according to the World Gold Council's latest report. Production varied among major producers at a country level.

Gold mine production dipped over 1 percent year-on-year.

According to the report, Chinese gold mine production slipped its fifth consecutive year-on-year decline in the third quarter. The Chinese gold mine has been considered as the largest producer since 2007.

The recently imposed regulations in the country targeted the discharge of cyanide in tailings. The WGC said that these regulations continue to bite and may affect production for over several more quarters.

An ongoing dispute between Acacia Mining and the government of Tanzania has disrupted production in that country, the council said. The dispute led to a 15 percent year-on-year fall in the third quarter. Acacia mining’s output  fell by 7 percent year-on-year.

The company has already expressed its intention to scale back its Bulyanhulu project. They will do this, according to the council, to manage losses caused by the government’s concentrate export ban.

Third quarter output from Burkino Faso also dropped 15 percent year-on-year as operations at the Inata project were scaled back.

The second-half output of the country’s largest mine, Essakane, is also expected to be lower.

New Mines Ramped Up Production

The council also said in the report that mine production in Suriname swelled 90 percent year-on-year, driven by Newmont’s Merian mine becoming fit for full capacity.

Meanwhile, in Canada, output climbed 10 percent year-on-year. This was backed by increases at Brucejack and Hope Bay, which both started their commercial production earlier this year.

In Argentina, gold mine production inched 15 percent, up year-on-year. The council said that the increase was due to a combination of a production ramp-up at the Cerro Negro mine and a strong quarter at Veladero.

A number of new mines are expected to enter production in the fourth quarter, although new mine starts in the third quarter were limited.

According to the council's report, new gold producers have ramped up production.

Producer Hedging

Further in the report, the council said that the gold market saw net producer de-hedging of 10t in the third quarter.

“This is the fifth consecutive quarter of the net de-hedging, a period that has seen the overall global hedgebook cut 24 percent to 218t,” wrote the WGC.

However, there were some notable tactical hedges that were initiated despite the hedgebook failing.

Acacia mining said that it had bought put options for 210,000oz of future production, coming as a response to its dispute with the Tanzanian government.

At the end of September, Yamana Gold also announced that it had entered into options contracts (for 285,000oz), which was done in order to secure cash flow during the completion of its Cerro Moro project in Argentina.

Meanwhile, Teranga Gold announced in September its selling forward of 131,000oz of gold as a source of finance for its Banfora project.

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