Australia Gold Output Hit By Cyclones In First Quarter

Gold production in Australia in the January-March period was dented by heavy cyclonic rains, but still managed to increase roughly 6% from a year earlier as the price for the precious metal continued to strengthen, a survey released Sunday showed.

The country produced 65 metric tons, or 2.1 million troy ounces, in the first three months of the year, a drop of 7% on the previous quarter but 4 tons more than was produced in the same period last year, Melbourne-based industry consultants Surbiton Associates Pty. Ltd. said.

Tropical cyclones and monsoon rains battered Australia in the first quarter, flooding mines in Australia's western and eastern states. Some mines were forced to suspend production for several days, while others processed lower-grade stockpiled material. Australia is the world's second-largest gold producer after China.

"With the widespread rain early this year it was as much a case of rivers of water as rivers of gold," said Sandra Close, a director at Surbiton.

Close said that two thirds of the country's gold operations reported lower output compared on quarter, with Johannesburg-based AngloGold Ashanti Ltd.'s (AU) Sunrise Dam operation in Western Australia state one of those severely hit, losing almost 30,000 ounces in production for the period.

The World Gold Council last week said the outlook for global demand for gold remains robust, underpinned by Chinese and Indian jewelry demand.

The U.K.-based council, which includes the world's biggest gold mining companies among its members, said demand in the first three months of the year was up 11% on year, at 981.3 metric tons worth about US$43.7 billion, thanks largely to a rise in demand for bars and coins.

In Australia, Surbiton said the SuperPit near the town of Kalgoorlie was the country's largest producer in the March quarter, with output rising to 200,000 ounces. The mine is equally owned by Barrick Gold Corp. (ABX) and Newmont Mining Corp. (NEM).

Newmont's Boddington mine produced 166,000 ounces, followed by Newcrest Mining Ltd.'s (NCM.AU) Telfer mine, according to Surbiton's survey.

All three mines are in Western Australia.

Canada's Barrick is the world's largest producer of gold, followed by Newmont and AngloGold. Newcrest is the biggest Australian producer of the metal.

The price of gold averaged US$1,386 an ounce in the first quarter, and hit an all-time high of US$1,541/oz on May 4.

Analysts at HSBC last week raised their assumptions for the price of gold on the back of unease about monetary and fiscal policies, as well as investor appetite.

They forecast a 12-month target for the metal of US$1,575 an ounce and US$1,450/ounce long term.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com

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