Recycled gold supply declines 2%, mine production up 4% in 2011: WGC

LONDON (Scrap Monster): Global recycled gold supply declined by 2% in 2011 while gold mine production advanced sharply by 4%, according to the latest report by World Gold Council (WGC).

Recycled gold and mine production are the two primary components of supply, experienced divergent rates of change. While they tend to respond to price differently, the continued decrease in recycled gold supply in the face of continuously rising prices is a bullish development.

According to WGC data, this was the second consecutive year-on-year fall in recycled gold from the peak of 1,694.7 tonnes in 2009. Despite the rise in prices, recycling activity was constrained by a combination of expectations for higher prices, acclimatisation to a higher current price level, economic growth and exhaustion of near market supply.

However, this was not regionally consistent. Falls in recycled gold were restricted primarily to developing markets such as China, India and Turkey that are active recycling markets with established infrastructure for selling back gold. Developed markets, particularly Europe, the US and Japan saw large increases in their supply of recycled gold where such infrastructure has only recently begun significantly to develop.

According to Thomson Reuters GFMS, mine production will reach an all-time high, as the rising price over the last decade has brought a strong pipeline of projects to fruition. In 2011, both formal and artisanal mining contributed to the growth in output, largely from Africa,.

“While the year-on-year change was lower in relative terms than that of the two preceding years, it was still well above the 10-year average. As we have noted previously,9 many of the increases in production from the formal mining sector are from existing projects being ramped up, as new finds continue to be elusive and rising input costs are pushing up costs for less established operations,” WGC concluded.