Geopolitical risks can deter Gold production, limiting supplies

Mining News  |  2012-05-04 09:22:53   |   By Paul Ploumis

Geopolitical risks can impede gold production, said HSBC bank in a commodity briefing.

LONDON (Scrap Monster): Geopolitical risks can impede gold production, said HSBC bank in a commodity briefing.

According to the bank, the case of AngloGold Ashanti, which is scheduled to start output from the Mongbwalu mine in the Democratic Republic of Congo in late 2013.

However, the mine faces impediments from thousands of ex-guerrilas and former soldiers already mining the area. Congolese law forbids independent prospecting on the concession, but the law is difficult to enforce.

As ore grades fall in traditional producing nations, companies have to look for new projects and in many cases they are hard to access, lack infrastructure or are in fragile states that lack central authority and are often subject to armed conflict, HSBC added.

These projects need high risk premiums for projects to be feasible.

“Gold production is also generally below levels that would otherwise be expected in more stable countries. This helps explain limited increases in mine supply, despite prices well above marginal costs of production,” HSBC concluded.

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