Australian 2023 gold output slips as miners cut head grades on high price

Australia produced 9.8 million oz. gold last year, an almost 3% decrease from 2022, finds the Melbourne-based Surbiton Associates.

Despite the slide, last year’s fourth quarter saw an increase of 105,822 oz., totalling 2.5 million oz., representing a 2% rise over the previous quarter. The year’s production at the current Australian gold price would total about A$32 billion ($28.6 billion).

The production decrease is a typical industry response to higher gold prices, where operators reduce head grades to extend mine life, thus lowering immediate output but maintaining profitability, Surbiton’s managing director, Dr. Sandra Close, said in a note to clients.

She highlighted the practice of blending lower-grade material, as done by Northern Star Resources (ASX: NST), with over 100 million tonnes available for such processes.

Gold prices recently soared to record levels, driven by anticipation of future cuts in U.S. interest rates.

On March 9, the Australian dollar spot price for gold peaked at a historic high of A$3,311 per ounce. Concurrently, the US-dollar spot price hit a record of US$2,195 per oz. during New York trading on March 8.

The Australian dollar gold price in the December quarter averaged A$3,040 per oz., with the US-dollar price increase only half that, impacted by the Australian dollar’s decline. Close stressed the importance of the exchange rate on local profitability and dividend capacity.

Amidst the rising gold prices, there’s been an uptick in Australian gold mining mergers and acquisitions. Red 5 (ASX: RED) plans to merge with Silver Lake Resources (ASX: SLR), potentially creating a 445,000-oz. annual producer by June. Evolution Mining (ASX: EVN) aims to acquire China Molybdenum’s 80% stake in the Northparkes operation, which will modestly increase its gold output.