Domestic control of Australian gold mining on the rise

Australian control over its domestic gold mining interests is on the rise, recent research has shown.

Last month, Surbiton Associates said the country’s $12 billion gold industry appears to be switching gears, with several major overseas players selling their mines to local companies.

The company claimed around 50 per cent of Australian gold production is now being handled by domestic firms, Mineweb reported.

The nation is currently the second-biggest gold producer in the world, responsible for approximately 9 per cent of global supply. Three-quarters of the yellow metal output comes from Western Australia.

Gold markets in Australia are popular because of the country’s close proximity to China and India, two of the world’s largest consumers of the precious metal. Australia also offers a range of premium vaulting services.

Dr Sandra Close, director of Surbiton Associates, said the recent pace of foreign mine sales has “increased significantly”.

“We have seen locals who already had operating experience expand their gold interests considerably,” she explained.

Last year, Australia’s Metals X acquired Canada-based Alacer Gold’s Higginsville and South Kagoorlie operations, while Toronto’s Barrick Gold sold Kanowna Belle and Plutonic to Northern Star Resources (NSR).

Moreover, Barrick Gold gave up its 51 per cent share in the East Kundana joint venture to NSR, which also purchased the Jundee mine from Newmont Mining in July.

“Several of the world’s largest gold producers have switched their strategy from chasing ounces to rationalisation and cost reduction,” Dr Close stated.

“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 large mines.”

The value of Australian gold

The importance of gold to the Australian economy should not be underestimated, Dr Close said.

She claimed the commodity is often overlooked as a valuable export, largely because the country’s iron ore and coal markets produce  larger revenues.

However, export earnings from gold are double that of wheat and four times higher than wool. The metal also brings in more money export meat sales.

Commenting on the news that Australia now has more control over domestic mines, Dr Close said “it looks great on paper”, but the reality is slightly more complicated.

She noted that most of the country’s reserves are tied up in iron oxide-copper-gold deposits, which may take many decades to be fully exploited.

Furthermore, because gold production in these mines is often reliant on the output rate of the main ore component, the industry can struggle if other commodity markets slow down.

“For a sustainable industry, we still need production from traditional primary gold deposits and ongoing exploration is as vital today as it ever was.”

Her comments come as the Western Australian government considers raising royalty rates in an effort to boost tax revenues earned through the state’s resources industry.

According to Dr Close, any changes made to levies should only be implemented after extensive consultation with producers.

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