Figures just released show that an historic event happened in the closing months of 2007.
China ended more than a century of South Africa's domination of the global gold mining industry to become the world's biggest producer.
The change at the top of the producer's rankings had been coming for the past couple of years as South African production slowed sharply as a result of falling grades and increasingly tough and expensive mining conditions.
London based consultancy, GFMS said that Chinese gold output rose to a record high of 276 tonnes last year, up 12% over 2006, while South Africa, production fell to 272 tonnes, from just over 275 tonnes in 2006.
China is already the world's biggest producer of aluminium, zinc and lead; the second largest of tin; and in the top 10 for copper, nickel and silver.
Its dominance in gold follows a 70% rise in output in the past decade and is the outcome of Beijing's determination to boost its local supply of commodities to rein in surging and costly raw materials imports.
Gold prices hit an all-time high of $US914 an ounce last week as investors sought refuge from a weakening US dollar. The price then fell sharply to around $US881 an ounce.
These record prices are the culmination of five years of growth in the price of gold. That has not done anything for the South African gold industry or the industry globally for that matter.
Australia isn't doing to well, nor is Asia outside of China or North America
South Africa has seen output halve in the past decade amid higher production costs, tougher safety regulations and more depleted mines.
It was only in 1970, 37 years ago, that South Africa produced 1,000 tonnes of gold. That was an estimated 75% of world output (the output of Russia, China and several other countries was unknown then).The decline since then has been slow but unyielding.
Philip Klapwijk, GFMS executive chairman, said the fall in output in South Africa and other traditional producers, such as the US and Australia, was the main reason why "global gold production is not raising in reaction to record gold prices".
Between 2000 and 2007, global mined gold fell by 6.7% while gold prices rose from around $US270 an ounce to more than $US850 an ounce.
South Africa's dominance of gold mining dates back to the discovery of the Witwatersrand reef in 1886, considered the "greatest goldfield in the world", on the edge of what is now Johannesburg.
GFMS said that mine production in 2007 fell by just over 1%, partly through delays to development and expansion projects.
Losses centred on South Africa, Peru and the United States, while gains focused on Indonesia (Grassberg) and, in particular, China whose increase knocked South Africa off the top spot to become the world's largest producer. Output in the first half of 2008 is forecast to grow by just over 2%.
Global cash costs rose a dramatic 24% year-on-year for January-September and hit a record level just over $400/oz in the third quarter. The rise was driven by such factors as US dollar weakness, higher royalty payments and mine development work.
Net official sector sales in 2007 rose by a third to 488 tonnes. The rise was driven by sales from signatories to the Central Bank Gold Agreement (CBGA) returning to ‘normal' levels after the low levels seen in 2006. Those outside the CBGA saw modest net purchases in 2007. First half 2008 sales are forecast to contract slightly to just over 200 tonnes.
Old scrap supply contracted by almost a fifth to just under 900 tonnes, chiefly as much of the loosely held supplies in price sensitive countries had been shaken out in 2006 and there was little repeat of the heavy trade inventory clear-out seen in the western world the year prior. Scrap in the first half of 2008 is projected to increase by around 15% to safely over 500 tonnes.
Jewellery fabrication in 2007 grew by 5% though, in terms excluding scrap, it rose 11%. This occurred despite the gold rally, as gains in the more stable first half outweighed second half losses when yet higher prices and volatility took their toll, with these swings largely driven by India.
Elsewhere, China and Turkey saw strong growth, Italy near stability, but US consumption fell heavily. Price damage in first half 2008 is forecast to slash demand by around a fifth to almost 1,000 tonnes. Other fabrication in 2007 rose by 2%, thanks to gains for medals and electronics, whereas in first half 2008 it is expected to see a decline of over 10%.
Producer de-hedging in 2007 rose by a provisional 14% to within a whisker of the 2004 record of 422 tonnes, with the bulk of activity taking place in the first half. Initial expectations for levels in the first half of 2008 are expected to fall to just under 100 tonnes.
For the full year 2007, implied net investment stood at a perhaps surprisingly restrained level of only just over 100 tonnes. However, this masks a major swing from disinvestment of around 200 tonnes in the first half to investment of around 300 tonnes in the second as a result of such factors as a weak dollar, energy price gains and the US subprime crisis.
In first half 2008, implied investment is forecast to grow yet further to well over 400 tonnes. Bar hoarding rose by a modest 3% last year, despite major price-led second half losses, while official coin fabrication fell by 3%. World Investment (the sum of bar hoarding, coin demand and the implied figure) totalled 465 tonnes last year, which represented a drop of just over 40%.
