Monday, February 23, 2009

Low-Grading Reduces Australia's Gold Output

Gold production in Australia dropped to 219 tonnes in 2008, the lowest figure in two decades.

What does gold ore look like?The main reason for the reduced output was low-grading, the process of reducing the grade of the ore mined during times of high gold prices. This is done to extend the life of the mine, as low grade ore (which has a lower gold mineralization) is not profitable to mine when gold prices are low. By mining the low grade ore during times of high gold prices, it is profitable and the easier-to-mine highgrade ore is saved for times of low gold prices when more physical gold output is needed to be profitable. It is a way of profiting from a mine with the longterm view of the future in mind.

Gold ore images.Most mines have a fixed amount of ore that they can process per day, and this doesn't change depending on the grade of the ore. So lower grade ore results in less gold being processed each day. Many shareholders in the mining companies don't like this longterm view, expecting huge returns in the short term when the price of gold rises. But the mine companies want to maximize the utility of their mines for as long as possible, because of the huge costs involved in constructing and staffing a mine.

It was down 29 tonnes from the 2007 figure of 258 tonnes, but Australia still remained the world's third largest gold producer behind China and South Africa.


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