World gold production in 2011 was 2,700 tons of gold (estimated by the USGS). Gold production had previously reached its peak in 2001 (2,600 tonnes of gold). The question is what does gold production look like in 2012 and whether production will again stagnate at this level.

Gold production around the world in 2011.

Among the eight largest historical gold producers in 2011, six increased their production and two fell.

1. Gold production in China grew 10 tons of gold (+2.9%), from 345 to 355 tons of gold.

2. Gold production in Australia increased by 9 tons of gold (+3.45%), 261 to 270 tons of gold.

3. Gold production from the U.S. increased 6 tons of gold (+2.6%), it increased from 231 to 237 tons of gold in 2011.

4. Gold production in Russia increased by 8 tons of gold (+4.17%), it increased from 192 to 200 tons of gold.

5. Gold production in South Africa increased by 1 tonne gold (+0.53%), it increased from 189 to 190 tonnes of gold.

6. Gold production in Peru fell 14 tonnes of gold (-8.5%), it increased from 164 to 150 tonnes of gold.

7. Gold production in Canada increased by 19 tons of gold (+20.9%), it increased from 91 to 110 tons of gold.

8. Gold production in Indonesia fell by 20 tonnes of gold (17%), it increased from 120 to 100 tonnes of gold.

Gold production of these eight historical top producers increased from 1,593 to 1,612 tonnes of gold, an increase of 1.19%. At the same time, world gold production increased by 140 tonnes of gold, or 5.47%. Once again, the small gold-producing countries experienced the strongest growth and attributed to the rising production. Their gold production increased by 121 tonnes of gold, or 12.5%.

Atomization of world gold production.

The share of small gold producers has increased since the beginning of the decline in gold production in South Africa in the early 70s. It rose from under 10% in 1970 to over 40% in 2011. But these small gold producing countries, collectively over a hundred different nations, just reach the level of production (1,088 tonnes of gold) of South Africa from 1969 to 1970 (1,000 tonnes of gold).

This fragmentation of world gold production has important consequences in terms of production costs. It was much easier and rational to produce 1,000 tons of gold on the Witwatersrand, in a 100 km radius around Johannesburg (economy of scale, staff, etc.) than scattered around the entire globe. Today, production of gold has turned into a global mosaic, it produces gold, but in smaller quantities in numerous mines far from each other.

The continually rising price of gold for 10 years has allowed the opening of many small gold mines from all over the world. They are often less profitable and therefore in a more precarious situation. They are much more sensitive to changes in gold prices and rising production costs.

Prospects for production in 2012 and beyond.

In 2010, I indicated that gold production would likely increase for 2 or 3 years. In summary, this increase was rooted in the rising price of an ounce of gold, temporary stagnation in production costs, the increase in demand (2008 crisis) and an increase in production from polymetallic mines (attributed to a increase in demand for industrial metals: copper, zinc).

Today, we should have an opposite phenomenon which should lead to the start of the decline in world gold production connected to the falling price (a consequence of the increase in world gold production from 2008 to 2011) and increasing production costs. This situation should last for a few years but will ultimately cause a new wave of rising gold prices.