Australia"s gold output rose slightly in the September quarter as new gold operations came into production according to Melbourne-based consultants Surbiton Associates latest quarterly report on the Australian gold mining industry.

Production for the three month period totalled 62 tonnes, one tonne more than in the previous quarter but two tonnes less than the corresponding period in 2005. Production for the first nine months of 2006 totalled 183 tonnes, 14 tonnes or 7% less than in the first nine months of 2005.

Surbiton Associates managing director Dr Sandra Close says: "The higher production this quarter was due to 10 new or recycled operations starting up.

"While this boosted overall output, the total amount of gold produced by existing mines remained relatively static."

Barrick Gold Corp's Cowal mine in NSW produced 45,000 ounces, an increase of 29,000 ounces on the previous quarter as the operation ramps up to full production. The 10 new or recycled operations contributed a further 23,000 ounces in total.

However, production from existing operations was variable. The Super Pit, owned equally by Barrick Gold and Newmont Mining, regained its status as Australia's largest gold mine, with output rising by 14,000 ounces to 178,000 ounces. Production at Newcrest Mining's Telfer mine fell by around 36,500 ounces to some 148,000 ounces, due predominantly to the treatment of lower grade ore. Barrick's Granny Smith operation also reduced gold production, with output falling 29,000 ounces to 63,000 ounces. This was due to lower grades and recoveries which were only partly offset by higher throughput.

The gold price in Australian dollar terms has declined from its all time record of Aus$933 per ounce in May 2006 and averaged A$821 per ounce in the September 2006 quarter. This was about A$20 per ounce less than the June quarter average but still around Aus$240 per ounce more than the average for the September 2005 quarter.

"One of the outcomes of the higher Australian dollar gold price is that existing gold producers are taking the opportunity to treat lower grade ore," Sandra Close says.

"Gold grades have declined progressively over the last nine months so that now, the average recovered grade is just under 2 grams per tonne."

Sandra Close says it is difficult for many people to appreciate just how much material is treated in order to produce the final product.

"It is pretty remarkable that gold can be extracted profitably from concentrations as low as 2 parts per million.

"It takes about 16 tonnes of ore to produce just one ounce of gold which is about the same size as a small square of chocolate."

Dr Close says that the effect of higher prices leading to lower production from existing producers was to be expected in the mining industry and was a perfectly reasonable and rational response. Mining is a carefully planned activity and a complex exercise in optimising a great number of variables.

Gold mines could produce spectacular profits if the companies mined and treated only the highest grade ore. However, this would result in much shorter mine lives and would leave behind lower grade material that would be uneconomic to extract. It could be considered an irresponsible and inefficient use of resources.

"Responsible mining companies optimise both profits and production," Sandra Close says. "Their aim is to make good profits for the shareholders while extracting as much gold as possible from each deposit."

The top five operations for the September quarter 2006 were: Super Pit - JV 178,000; Telfer 147,957 ounces; Kanowna/Paddington 129,000 ounces; St Ives/Lefroy 123,362 ounces; Sunrise Dam 108,219 ounces.