Pushed by US sanctions, Russia will overtake China in gold production within decade – Fitch

Fitch Solutions has projected that Russia will grow its gold output and reserves in light of expanding US sanctions. That will lead to Russian gold production growth overtaking that of China by 2029.

“The rising risk of Russian state banks being frozen out of dealing in dollar-denominated assets all together as bilateral relations remain strained is pushing the Russian central bank to increase its holdings of gold. As long as tensions with the US remain, domestic demand for gold is set to remain,” said the report.

According to Fitch, Russia’s gold production will rise from 11.3-million ounces in 2020 to 15.5-million ounces in 2029, which would mean a rise of 3.7 percent on an annual basis during that period. That means Russia would account for 11.6 percent of global gold output as against today’s 10.6 percent.

As for China, Fitch said that gold output has been challenged by strict environmental regulations on solid waste from gold prospecting, which have led to a wave of gold mine closures and output declines in major producing provinces, including Shandong, Jiangxi and Hunan. 

At the same time, years of intensive gold mining has also resulted in falling reserves and production halts in several areas, including Qinghai and Gansu.

Fitch expects China’s gold production to stagnate between now and 2029, growing 0.2 percent on average on an annual basis. “This marks a notable slowdown compared with the average annual growth of 3.1 percent over the previous 10-year period. Nonetheless, the country will remain the largest global producer of gold ore by a significant margin.” 

The report pointed out that China’s increased investment in foreign gold mines will help the nation preserve its top-producer status.

“Key deals in recent years have included Chinese firm Shandong Gold’s purchase of a 50 percent stake in the Veladero mine in Argentina from Barrick Gold for $960 million. The firms will also work together on exploration activities in the area,” the report said.

“In 2017, Zijin Mining produced 1.2moz (million ounces) of gold, reportedly accounting for 10.2 percent of China’s total output.”

Overall, global gold mine production growth is expected to rebound in the coming years due to higher gold prices and mergers between major mining firms, according to Fitch.

“We forecast global gold production to increase from 106moz in 2020 to 133moz by 2029, averaging 2.5 percent annual growth,” the report projected. “This would be an acceleration from the average growth of just 1.2 percent over 2016-2019.”

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