sharing in governance of extractive industries
By the way, these questions are ranked by the frequency in which they get asked; the first being the most-often-asked question and following…
Yes, gold mining is still happening across the world. In fact, in 2018, over 3,500 tonnes of gold were produced worldwide, with China leading global output followed by Australia, Russia, and the United States. The gold industry is made up of a few major producing companies and many smaller-sized miners. Major players include Newmont Goldcorp (American), Barrick Gold (Canadian) and AngloGold Ashanti (South African).
Let's start with Jewelry since the question calls it out. Jewelry accounts for approximately half of the global demand for gold. India and China are positioned as the largest consumers, together accounting for about 60 percent of the jewelry market (in 2018). These two countries’ interest is driven, among other things, by a historically strong cultural attachment to the metal. In an upcoming article, I’ll be drilling down deeper into India and China’s love affair with gold.
After jewelry, Investment Demand and Central Bank purchases drive gold consumption. Because gold is known to be a long-term store of value and a safe-haven for investments during times of uncertainty, investors use it to diversify their portfolios. After spending a few decades reducing their gold inventories, Central Banks reversed their selling trend by moving away from paper currencies following the Global Financial Crisis in 2008, thus putting upward pressure on total demand.
Finally, recent developments in Technology have and continue to grow new needs for gold. The metal is used in a variety of applications including dentistry, medicine, computers, electronics, mobile phones, and more. In 2018, technology only represented seven percent of total demand however we should note, this area is fast growing.
Let me provide a highly simplified version of the process that does not include the chemical inputs and other sub-processes the ore undergoes. The mined material containing gold from the pit is transferred to a processing plant, which usually is located within the operational infrastructure of most mines. The plant produces what is called a doré bar, with a gold content between 70 and 80 percent. The doré bullion from the mine is then shipped to refineries around the world to undergo a further refining process to produce gold to a purity of 99.5 percent or higher. The final product is then sold into the wholesale markets.
Note that bullion banks play a crucial role in this cycle as they ensure a stable flow of produced gold between the miners and the wholesale industry. In the role of a middleman, bullion banks facilitate the gold trade by providing financing and delivering the physical gold. In this clearing role, they buy the gold from producers and sell the gold to large consumers including jewelry houses, Central Banks and major investors.
And there you have it, my quick answers to a few common questions I get about gold mining. Have any of your own? Or, to those of you in the industry: what questions do people ask you? Leave a comment to let me know what other water cooler/dinner party/plane conversations you’re having out there as well.
Data Source: World Gold Council
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