Gold output may rise 2% in '07

The world gold production is likely to rise moderately by 2 per cent to 2,500 tonnes in 2007 despite the commissioning of new mines, capacity ramp-up in the existing ones lower production cuts that dampened output last year, according to GFMS, a London-based precious metals research major.

Global gold mine production posted a substantial 79 tonne, or 3 per cent, decline in 2006, leaving the output at a 10-year low, said GFMS after launching the Gold Survey 2007 on Wednesday in London.

China recorded a robust 8 per cent increase in output year-on-year, even as the Asian production declined the most, falling by 46 tonne, compared with the relatively modest losses in North America and Africa, where the output contracted by 26 tonne and 17 tonne, respectively.

Elsewhere, Oceania registered a 21 tonne fall in output, while in the CIS, the production of the yellow metal declined by less than six tonne.

Latin America was the only region to register a meaningful rise, having posted a 35 tonne, or 7 per cent, increase year-on-year.

A rise of $45 an ounce is likely to lure miners to continue maximum output this year despite rising cost of production, which reportedly doubled last year because of mounting energy prices. Gold miners' margins widened by a healthy 66 per cent year-on-year, the report said.

Meanwhile, a GFMS official anticipated the current year as another significant one, with higher levels of de-hedging in the first half expected to put the full-year figure between 210 and 260 tonne.

He warned, however, that with producers' bullish expectations on the price front, it would be unwise to rule out further buy-backs that could potentially push de-hedging in 2007 above the 300-tonne mark.

Following 2005's modest decline in the global hedge book (a revised figure of some 86 tonne), the activity accelerated in 2006, with a cut of some 373 tonne from producers' outstanding commitments.

The elevated levels of de-hedging in 2006 and the string of announcements towards the end of the last year and the first quarter of the current year, put paid to any thoughts that the slowdown witnessed in 2005 was a sign that the six-year cycle of de-hedging had finally run out of steam, the report further added.

The report noted that gold sales declined 51 per cent y-o-y to 328 tonne in 2006. The decrease was the largest contributor to the 5 per cent fall in total supply in 2006.