Over the past 50 years, the percentage of gold produced by the top five producing countries (China, Russia, Australia, the United States, and South Africa) has declined from 91.6% in 1970 to 40.9% as of 2019. This sharp overall decline has coincided with a precipitous drop in output from South African mines, which has driven EMEA-based share of global product down from approximately 88% in 1970 down to a low of 25% - as measured by each year’s top 10 producing countries.
According to the USGS, increased gold production in Australia, China, and Indonesia has helped offset decreased gold mine production in Peru, South Africa, the United States, and Zimbabwe. While producers in Asia Pacific and Australia have ramped up production to offset this decline, the overall impact has decentralized volume out of the top five contributors, democratized the global Gold market, and broken down the oligopoly that was previously in place throughout much of the 20th century.
Despite booming precious metal prices and the world’s largest gold reserves, production from South Africa has been in a steady decline since the mid-1970s. This decline is multi-pronged and the result of unique circumstances related to both infrastructure and socioeconomic factors.
Much like Brazil - which struggles to unlock the value of their vast Ag and Energy resources due to less than optimal road, rail, and port infrastructure - South Africa faces similar issues related to their mineral wealth, valued by Citi at more than $2.5 Trillion in 2010.
Critical infrastructure needs and the underlying power to support wide-scale transport are major culprits exacerbating South Africa’s problems. Decades of policies subsidizing electricity for industrial use - meant to attract foreign investment - have been withdrawn, and the result is a system that no longer can operate at the economics that were previously driving the engine of production.
In addition to these significant structural challenges, are the harsh realities of dealing with a societal backdrop rooted deep in injustice. The exploitation of many to the benefit of the few drove outsized production of the 20th century, and the reality of more traditional labor force dynamics has provided a shock to the mining ecosystem that has been difficult to recover from.
Meanwhile, Chinese production has significantly ramped up over the past thirty years, absorbing some of the slack in the system coming from South Africa’s challenges. In 2018, China produced roughly 400 tonnes of gold.
Gold mining, and the general extraction of minerals, in China has benefited significantly from a strong increase in investment both domestic and abroad. Subsequently, Chinese gold output has continued to accelerate - more than doubling since 2000.
For a long period of time, South Africa was on top of the gold production industry, but Chinese production surpassed South Africa in 2007, producing 275 tonnes to South Africa’s 253 tonnes, and has continued to expand the gap between the two countries. This significant increase in production still hasn’t been enough to satisfy demand for the metal from domestic consumers - roughly 1,000 tonnes per year - and has driven the country’s push to acquire mines overseas. These supply and demand dynamics are bound to shift eventually, as the Chinese economy matures and their shrinking trade surplus moves towards zero.
Such a mature economy like the United States’ has seen limited volatility in gold production over the past two decades - averaging between 250-265 tonnes of production on an annual basis from 2000 through to 2019.
All of the factors that we’ve discussed have led to the democratization of the global gold production industry. As the production landscape continues to evolve, what’s clear is that global concentration is something that is likely to continue decreasing.
The factors driving this change of gold production in top producing countries over time include the distribution of cost-effective modern mining techniques and technologies, along with rising global standards for labor best practices - with some unfortunate exceptions scattered across developing economies.
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