Primary gold supply – countries, companies, consolidation and costs

Abstract

At first glance, there appear to have been few changes in the gold supply industry in the past 25 years – compared with 1989, South Africa is still the number one producing country, South African and North American gold producers dominate the industry, unit operating costs are around US$250/oz and the gold price is US$420/oz. However, under the surface, there are some fundamental changes in the industry – it is bigger, more globally diverse, more valuable and dominated by some companies which were not around in 1989. Although average production costs seem to have stood still, they have in fact fluctuated enormously over the years and now have different dynamics to the 1980s. Importantly, the international gold price is moving in the opposite direction to what it was 15 years ago. This paper looks at the structure of the industry, as it was in 1989 and as it is now, and explains what has happened in the intervening years by analysing the main industry forces in the context of countries, companies, consolidation and costs. Using World Gold's 6D life-cycle model of the industry – Detection, Discovery, Definition, Design, Development, Depletion – the paper suggests what all this could mean for the future of the gold mining industry.