A new report by Fitch Solutions forecasts that global gold production will increase from 106 million oz. in 2020 to 133 million oz. by 2029, for an average annual growth rate of 2.5%.
According to the report, this result would be an acceleration from the average growth of just 1.2% over 2016-2019.
In the market analyst’s view, Russian gold production will lead the rise with gold output jumping from 11.3 million oz. in 2020 to 15.5 million oz. in 2029. This figure represents average annual growth of 3.7% during 2020-2029 and would see Russia overtake China as the largest gold miner, accounting for 11.6% of global output by 2029, compared with 10.6% in 2020, Fitch noted.
Russia’s production growth is being driven by the central bank’s desire to increase its gold holdings as a result of ongoing U.S. sanctions and the rising risk of Russian banks being frozen out of dealing in U.S. dollar-denominated assets.
However, Fitch says that in the longer-term Russian gold production will be underpinned by at least 21 new mining projects due to come online. At the forefront of this trend is Polyus Gold (LSE: PLZL; US-OTC: OPYGY), whose Natalka project achieved full production in 2019 and has a production capacity of 420,000-470,000 oz. per year.
At the same time, the company is developing Sukhoi Log, one of the country’s largest untapped goldfields with potential annual output of 1.7 million ounces.
China’s gold production, on the other hand, is expected to remain steady in the next 10 years, with an average annual growth rate of 0.2%, a notable slowdown compared with its average annual growth of 3.1% in the previous decade.
Fitch’s review states that these results are the product of stricter environmental regulations, particularly those around solid waste from gold prospecting, which led to a wave of gold mine closures and output declines in major producing provinces, including Shandong, Jiangxi and Hunan.
Years of intensive gold mining also plays a role in the deceleration, as the activity has resulted in falling reserves and production halts in several areas, including Qinghai and Gansu.
At the same time, major Chinese firms are expected to ramp up investment in foreign gold mines, as the country’s gold demand growth outpaces production. As an example, Fitch highlights Shandong Gold’s purchase of a 50% stake in the Veladero mine in Argentina from Barrick Gold (TSX: ABX; NYSE: GOLD) for US$960 million.
Australia is expected to see modest production growth over the coming years, supported by a strong project pipeline, rising gold prices and competitive operating costs.
Production in Australia is set to increase from 11.7 million oz. this year to 14.2 million oz. by 2029 for average annual growth of 2.2%, Fitch forecast.
OZ Minerals (ASX: OZL) is the company on top of the curve, the report stated. It’s developing the A$916 million (US$676 million) Carrapateena copper-gold project, one of the largest mines under construction in Australia. Carrapateena was commissioned in the fourth quarter of 2019. The mine has an estimated 20-year mine life and is forecast to produce about 65,000 tonnes copper and 67,000 oz. gold annually.
Fitch’s report also states that the U.S. gold mining sector will continue to attract significant investment activity supported by the country’s history of exploration and known precious metal deposits.
Nevada in particular will remain a key location for exploration and development, Fitch said, with both Barrick and Newmont Mining (TSX: NGT; NYSE: NEM) committed to several large-scale projects in the state.
Among these projects is Barrick’s flagship Goldrush project near Cortez, which has estimated proven and probable reserves of 8.7 million ounces.
As well, Barrick and Newmont are building a third shaft at the Turquoise Ridge mine near Winnemucca, which is forecast to increase annual production to more than 500,000 oz. per year by 2023.