Newcrest's Telfer mine in Western Australia was the top Australian producing operation in the quarter with 146,101 ounces produced, followed by the Super Pit, a venture near Kalgoorlie involving Newmont and the world's largest gold miner Barrick Gold Corp.
Like the economy generally, rising energy and constriction costs have hit mining hard, leading to sharply higher costs. As well Western Australia saw production down affected by the gas supply outage at the Apache Energy facility on Varanus Island.
That saw mining companies and other businesses forced to pay more for emergency supplies of gas, electricity or diesel fuel.
Adding to the pressures on the sector gold prices are trading well under the March all time high of $US1033 an ounce. Gold was trading around $US200 an ounce under that level in Asia yesterday.
It dropped sharply in Europe last night when Hurricane Gustav only wet New Orleans and didn't destroy it.It traded around $US822 an ounce.
If it trades at this level for an extended period of time, demand might again pick up. The sustained high prices above $US900 an ounce have seen demand drop, especially from the jewellery industry and from big consumers like India and the Middle East.
JP Morgan made some slight changes to its gold price forecasts yesterday in a note to clients.
"We have marginally reduced our CY08E average prices by 2.8% however CY09E and CY10E forecasts have increased by 1.3% and 7.1% respectively. Our long-term gold price forecast (commencing from 2014, real 2008$) remains unchanged at US$750/oz."
In its second quarter report and outlook commentary last month, the World Gold Council that demand will continue to be constrained by the high prices, but supply is being limited by the de-hedging still going on and a fall off in the amount of metal being sold by central banks.
"While the sense of economic or financial crisis lasts, gold investment demand will continue to be robust, although high prices are likely to generate a certain amount of profit taking.
"Under these circumstances, jewellery demand is likely to remain subdued in most countries. Nevertheless, despite the adverse impact of rising food and energy prices on household budgets, the potential for stronger jewellery demand remains, once prices stabilise sufficiently to regenerate
"Gold supply has remained constrained for some years. While the pace of net de-hedging that has contributed to the tight supply situation in recent years is not sustainable for much longer (if at all), net central bank sales appear to be slowing.
"Unless a substantial new seller emerges, net sales under the Central Bank Gold Agreement in the current CBGA year, which ends on September 26, could be the lowest since the first Agreement was signed in 1999.
"At 802 tonnes, second quarter supply was little changed from one year earlier. This concealed contrasting movements in the different components with a sharp reduction in official sector sales offset by the combined effects of a rise in scrap supply and a deceleration in net de-hedging.
"Mine output is provisionally estimated to have been 4% lower than a year earlier at 590 tonnes. There was a sharp rise in Russian output largely due to enhanced production at Polyus's Olimpiada mine following the commissioning of a new sulphide ore processing plant. Chinese output also appears to have increased.
"However gold output in Indonesia fell sharply, primarily due to planned mine sequencing at the Grasberg mine but also due to a fall in output at the Batu Hijau mine, while output in South Africa and in Australia seems likely to have remained weak. For the first half as a whole and taking account of a weak (revised) Q1 figure, output was 6% below year-earlier levels.
"Q2 was a further quarter of substantial de-hedging, although it was less than in the exceptionally high quarter of Q2 2007. The 131 tonnes reduction was partly due to a major buyback program by Anglogold Ashanti and to a number of smaller operations by several companies.
"Overall mine supply, at 458 tonnes, was 10% higher than a year earlier, although for the first half as a whole it was 4% below year earlier levels.
"Net central bank sales were broadly similar to levels seen in Q1. They were substantially lower – 43% down – on levels recorded for Q2 2007; net sales in Q2 and Q3 2007 were relatively high due primarily to rapid selling by the Swiss National Bank.
Sales under the Central Bank Gold Agreement amounted to around 317 tonnes by 31st July and have been running below last year's levels.
"Indeed, taking account of publicly available information on central bank intentions, it seems possible that net selling in the current CBGA year, which ends on September 26, could be the lowest since the first CBGA was signed in 1999 (the previous low figure being the 385 tonnes recorded for the last year of the first Agreement).
"Scrap supply, at 256 tonnes, was 13% higher than in Q2 2007 but lower than the levels seen in the first quarter. Supplies from Asia and the Middle East were lower than in February and March due to the lower prices.
"In North America and Western Europe scrap supplies have been boosted by advertisements encouraging people to take advantage of the high gold price to sell back jewellery. In contrast, sales for re-melt of unsold stock by suppliers and retailers have declined, partly as traders are now working on lower stock levels."
