Gold output rose some 4% to 69.5 tonnes in the latest period, up from 67t in the June quarter – a rise of some 12% on the 62t produced in the corresponding quarter last year.

“The higher production was due to the treatment of higher ore grades and this, in turn, reduced cash costs,” Surbiton Associates director Dr Sandra Close said.

“This is precisely what we expected, given the decline in gold prices in April and the lack of a significant recovery since then.”

Close said the US dollar price of gold was around $US1580 per ounce at the start of April and fell as low as about $1190/oz by the end of June.

She said it recovered to average $1326/oz for the September quarter and is currently around $1240/oz.

“However, it is the Australian dollar gold price which is important locally,” she said.

“Fortunately, the decline in the Australian dollar exchange rate has given producers some relief, with the Australian dollar falling from around 105 to around 90 US cents this year.

“One of the notable features in the September quarter is the substantial decline in cash costs for Australian operations.

“This is due to two factors – increased ore grades and operators’ renewed focus on cost reductions across the board.”

During the decade-long period of rising gold prices between 2001 and 2011, gold producers progressively reduced the grade of ore being treated, which resulted in lower gold production and higher cash costs.

Now the reverse is happening, particularly since the fall in gold prices earlier this year.

Higher grades are being treated, gold production has increased and cash costs have fallen.

“Mining higher grade ore is a perfectly rational response when the price of gold declines, so that margins are maintained,” Close said.

“This should not be confused with the practice of ‘high grading’, where only the richest ore is treated and the resource not properly utilised.”

Close said the Western Australian government, which is reviewing mining royalty rates, should tread lightly when it comes to the gold miners.

WA produces about 70% of Australia’s newly mined primary gold.

“I am all in favour of the states receiving a fair royalty but it is a delicate balance,” she said.

“If the royalty is too low, the state government and the community lose out but if it is too high some operations will close, unemployment will rise and investment in the gold industry will decline.”

Close suggested the WA government should take a lesson from Roman poet Ovid and heed the words of Daedalus when he and his son Icarus were preparing to escape from the island of Crete, using wings made from feathers and wax.

“Fly a middle course … fly between the extremes,” Daedalus warned Icarus.

However, Icarus flew too high, the heat of the sun melted the wax holding the feathers and Icarus plunged to his death.

“The latest numbers show the gold mining industry is working hard to remain competitive while in the minerals industry as a whole, unemployment has risen considerably,” Close said.

“Now is not the time to put further cost pressure on the gold producers.”

During the September quarter several operations posted significant increases in gold production.

Barrick’s Yilgarn South operations – Granny Smith, Darlot and Lawlers – which have recently been sold to Gold Fields, were up 42,000 ounces; Newmont’s Tanami output rose by 38,000oz; and output at Newmont and Barrick’s Super Pit was up 24,000oz.

On the other hand, production at Newcrest’s Telfer operation was down 38,000oz, as treatment of lower grade underground ore was cut back.

Two new operations joined the list of producers during the quarter.

Doray Minerals’ Andy Well operation produced 13,800oz and the Tropicana project owned by AngloGold (70%) and Independence Group (30%) poured its first gold on September 26.

Tropicana is scheduled to produce around 100,000oz of gold in the December quarter this year.

The top producing operation for the September quarter in 2013 was Newmont’s Boddington gold mine in WA’s South West, which posted production of 178,000oz for the quarter.