EDITOR: | October 9th, 2013 | 2 Comments

Gold keeping countries running

| October 09, 2013 | 2 Comments
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auminingGold is good for you. Or, at least, your economy (if you live in a gold producing country).

The World Gold Council and international accounting firm PwC have introduced a whole new argument for the yellow metal. So set aside, for the moment only, the well-worn case that gold is the one form of currency in the world that everyone trusts, and realise that the metal is also an important creator of wealth — not through the ownership of it, but by the production. In their report, The Direct Economic Impact of Gold, the authors point out that the gold mines in the world’s top producing countries — so they’re not even including all the gold mined outside those 15 nations — are estimated in 2012 to have generated gross value added (GVA, which includes the contribution to the gross domestic product, wages and taxes paid) a total $78.4 billion.

To put that in perspective, that $78.4 billion is equivalent to the entire economic output of Ecuador. Or Azerbaijan. Or 30% of the estimated GDP of Shanghai. Gold is keeping some countries going: it made up 36% of Tanzania’s exports in 2012, and 26% of those from Ghana and Papua New Guinea.

Gold helps people find jobs. In those top 15 producer countries, 527,900 people are on the payrolls of gold mining companies. Just over 145,600 South Africans are employed at gold mines, and 134,000 Russians. China is estimated to have 98,000 people in the sector (which comes as a surprise; clearly the ounces of gold per employee is much higher there, not something we normally associate with labour-intensive Chinese enterprises).

But the contribution made by individuals is different and, not surprisingly, reflects wage levels. The GVA per worker in the U.S. is $841,800. In South Africa, it’s $39,600.

But, of course, it all depends on the size of the country as to gold’s contribution. In stark contrast to the importance of the metal to Tanzania, Ghana and Papua New Guinea as mentioned above, gold represents just 0.2% of China’s economic output. Actually, even in GDP terms — as separate from export receipts — those three countries rely heavily on the precious metal. It constitutes 15% of PNG’s GDP, 8% of Ghana’s and 6% of Tanzania’s.

Then again, we have a whole different set of ratings when it comes to where investment on new gold capacity is going. In that category, Canada is tops with $2.6 billion of new money in 2012, followed by the U.S. ($2.5 billion) and Australia with $2.3 billion. Yet none of those jurisdictions is in the “setting-the-world-on-fire” category. West Africa and Latin America are the exciting frontiers for exploration but, of course, the money they attract is divided up between several countries; in West Africa, for example, the new projects are spread across Ghana, Ivory Coast and take in Liberia, Mali, Niger, Burkina Faso, Senegal, Mauritania, and others.

Then there’s tax. Without Newmont Mining producing gold, the Australian Taxation Office would be without the $366 million the U.S. company pays to Canberra each year. Newmont in 2012 paid $159 million in Ghanaian taxes, $188 million to the tax guys in Lima, and the IRS in Washington got a check for $438 million. Mexico received $442 million in taxes from Goldcorp.

But, wait, there’s more. Throw in recycling of gold, fabrication of coins and bars, add fabrication of gold jewellery, and you get to $210 billion GVA for the global gold industry, or at least across those 15 countries. This makes the gold industry across those 15 countries equal to the GDP of Ireland. Or the Czech Republic. Or Beijing.

This all puts quite a new shine on gold, doesn’t it?

The top gold producing countries (2012, in tonnes)

  1. China 413
  2. Australia 250
  3. U.S. 231
  4. Russia 230
  5. Peru 185
  6. South Africa 178
  7. Canada 108
  8. Ghana 96
  9. Mexico 95
  10. Indonesia 89
  11. Uzbekistan 73
  12. Brazil 67
  13. Papua New Guinea 57
  14. Argentina 55
  15. Tanzania 49

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Comments

  • Nevada George

    China… Gold’s’ number one fan.

    Number one in production and China
    has tight overall control over its’ gold exports.

    China eased its gold import restrictions and
    domestic demand went on a buying frenzy.

    Gold products being bought through Hong Kong exchanges.

    China National Gold Corp sniffing out mining
    acquisitions globally… including trying to pick up some
    castoffs from the Major mining companies.

    etc., etc., etc.,

    I guess China does not believe in all the negative press about
    gold that is being disseminated by the Behavioral Finance guys.

    Yep… My bet is that China is spot on, eh!

    I will hold .. awaiting a multiyear “upward” correction.

    October 10, 2013 - 10:49 AM

  • eru

    A very interesting read. There is one country that you forgot to mention in your article that entered in the Gold and Copper producing row just recently … a north eastern African country called Eritrea. A Canadian publicly traded company called Nevsun (NSU) made a killing the last two years. Its stock went from just pennies to upper 7s and now at almost $4 per share. Gold is the the only exportable commodity that is holding this war torn country abreast …
    Another junior miner operating in this same country called Sunridge Gold (SGCNF) is following the foot steps of Nevsun. It reminds me of Nevsun’s early days.
    Despite the human rights issued in the country, Gold and Copper are holding the economy breathing. I have no idea what would happen to the political situation of the country, had it not been for gold.

    October 29, 2013 - 2:01 AM

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