Gold price stalls development

Gold mining and gold exports play a vital role in many countries in the Asia-Pacific region, but their future economies are threatened by the low international price of the precious metal. Exploration and mine development in the region’s less-developed countries have been curtailed, and this, in turn, has hurt employment levels and stalled infrastructure development.

These are some of the conclusions of Burning Bright: The Importance of Gold Mining to the Asia-Pacific Region, a report published by the World Gold Council (WGC).

Prepared by Penelope Plowden and Georgina Wilde, former researchers for The Economist magazine who now consult independently, the report examines the importance of gold mining in 14 countries. It is the third in a series of reports commissioned by the WGC on the gold industry’s role in world economic development. The previous two reviewed the position of debt-ridden poor countries in sub-Saharan Africa and Latin America. All three reports are available at www.gold.org

The latest report focuses on Australia, New Zealand, Japan, Papua New Guinea, Fiji, Malaysia, Thailand, Indonesia and the Philippines. It argues that gold mining can contribute greatly to the development of the poorer of these nations provided they can attract investment. However, the low price has deterred many companies from starting projects, while forcing others to shut down.

One of the largest economies in the region, and the world’s third-largest gold producer, is Australia, where, since 1997, gold production has fallen by 5% while the yellow metal’s contribution to exports fell by 1%. Along the way, several high-cost mines were forced to close.

“The Australian gold mining sector is proving resilient to the present low gold price through mergers, the depreciating Australian dollar and cost control,” the report states. “But this process cannot continue without threatening output and exploration.”

At the other end of the spectrum is Papua New Guinea, whose economy is largely driven by the mining of gold and other minerals. More than two-thirds of the country’s exports in 1999 were minerals, and mining accounted for more than 90% of new investment from 1994 to 1996. Gold also accounts for more than 30% of the total value of PNG’s exports. But while gold production there has risen by 54% since 1997, revenue has increased only 30% and, as elsewhere in the region, development is being hampered by a slowdown in exploration and development.

— The preceding is a summary of information published by the London-based World Gold Council.