Australian gold production declined sharply in the March 2006 quarter following heavy rain from six tropical cyclones and a tropical low in Western Australia , the Northern Territory and northern Queensland according to Melbourne-based mining consultants, Surbiton Associates Pty Ltd.

Gold production totalled 61 tonnes for the latest three-month period, down 8% on the previous quarter and down almost 10% compared with the March 2005 quarter.

Surbiton Associates managing director Dr Sandra Close says the March quarter gold production is always at risk from tropical cyclones and wet weather but this year was particularly bad. "We can blame Tropical Cyclones Clare, Darryl, Jim, Emma, Kate and Glenda, plus a Tropical Low thrown in for good measure."

Dr Close says that Western Australia alone accounts for some 75% of the total gold produced in Australia . Although the cyclones are most severe in the northern coastal regions of Western Australia , Queensland and the Northern Territory , they often move south and degenerate into rain depressions that affect gold mining, ore haulage and processing operations.

The Western Australian gold fields have been particularly hard hit this season. Sandstone and Meekatharra in Western Australia both recorded more than 500mm of rain in the March quarter. In the Northern Territory , parts of the Tanami Desert received more than their average annual rainfall in just few days.

"Despite the poor start to the year, with luck and with the new projects coming on stream over the next few quarters, 2006 output should still at least match the 264 tonnes produced in 2005," Dr Close says.

"At current prices, every tonne of gold is worth around Aus$27 million and annual output is worth around Aus$7 billion."

She says that the March quarter saw some reduction in the tonnage of ore treated and as well, the grade of gold ore processed was lower. When wet weather causes operational problems, companies are often forced to keep their plants running by treating ore from low-grade stockpiles.

"A further factor could be the deliberate policy of some producers to reduce the grade of gold ore being fed into the treatment plants, while gold prices are high, in order to prolong the lives of their operations," Dr Close says. "Unfortunately, any signs of this have been completely swamped by the effects of wet weather, so we will have to wait a few more quarters to see if this is really happening."

Dr Close says she was not surprised that the price of gold and other metals had fallen in the last two weeks. In the case of gold and some of the base metals, the recent price rises, in both US dollar and Australian dollar terms, were so sharp since the end March that a correction was not unexpected.

Gold prices hit a peak of US$730 (A$941) per ounce during London trading on May 12. By May, five trading sessions later, gold prices had fallen as low as US$638 (A$850) per ounce. Since then prices have recovered a little.

"It was a case of too far, too fast," Dr Close says. "You have to remember that what goes up can just as easily come down - it has happened so many times before."

Dr Close says that while she cannot predict the future and therefore cannot predict what gold prices are going to do, a number of factors remain that could continue to push prices higher.

"Gold mine production in South Africa , Australia and the United States , the world's three largest gold producers, was down for early 2006," Dr Close says.

"In addition, the US still has problems with its twin deficits, the US dollar still looks vulnerable, there is still instability in the Middle East and Iran still has its nuclear ambitions. Not much has changed really."

The top five operations for the March 2006 quarter were: Newmont Mining Corp 50%, Barrick Gold Corp 50%. Super Pit-JV 176,000 ounces; Newcrest Mining Ltd, Telfer 162,812 ounces; Gold Fields Ltd, Lefroy/St Ives 134,262 ounces; Barrick Gold Corporation, Kanowna and Paddington mines, 118,000 ounces; and Newmont Mining Corporation, Granites, 108,000 ounces.