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How Gold Mining Supports Global Economic Growth

This article was contributed by the World Gold Council.

How much is gold mining worth to the world? What does it contribute, if anything, to global progress? These are big questions worth answering in a rational and rigorous manner to help build confidence with our industry’s stakeholders.

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In 2013, the World Gold Council, in collaboration with mining and economics experts at PwC, published a report titled The Direct Economic Impacts of Gold. This research sought to quantify what the whole gold market – from mine production to end consumption – added to the global economy. Gold mine production, the early part of the value chain, was estimated to have directly created a total economic value of US$78.4 billion in 2012. While this was a substantial figure, we knew we had adopted a very conservative approach in arriving at it and only captured part of the picture. We therefore resolved to look closer and in more detail at measuring gold mining’s total economic value.

To this end, we recently launched a report, The Social and Economic Impacts of Gold Mining, authored by international economic consultancy Maxwell Stamp, examining how the industry contributes to economic growth and social development. This new work sheds considerably more light on gold mining’s overall impact on the world’s economy, finding that in 2013 this totaled at least US$171.6 billion.

But to arrive at this number we first had to return to look at gold mining’s direct impacts. Direct impacts refer to the value created specifically from mining outputs, trade, primary employment and direct taxation. We were able to enhance our estimates of the direct economic impact of gold mining by considering a much wider range of companies and countries than in previous studies. We concluded that in 2013, formal gold mining directly added US$83.1 billion to global GDP.

However, this measure does not capture indirect contributions – for example, the value that flows to suppliers and providers of support services to the mining industry and their employees. Neither does it reflect payments to governments for items not directly related to mining, such as corporate tax, income tax or even fuel tax. It also doesn’t attempt to include monies passed to communities to enhance local infrastructure and capacity.

The bigger figure of US$171.6 billion captures many of these wider benefits by considering the value that emanates from mining but is distributed well beyond mining projects and operations. Significantly, these economic contributions are larger in scale than the more obvious and more frequently reported direct impacts. That figure is larger than the GDP of more than half the countries on the planet and many billions of dollars more than the world’s total overseas aid budget (and seven times more than recent US aid budgets).

But snapshots of the value created in a single year do not illustrate change or growth over time. In this new research, we were very eager to define how gold mining has developed and evolved in terms of its contribution to growth and progress.

Globally, gold mining is very much a growth industry. It has spread geographically over the last few decades, and the era when a single country dominated production – in 1970, South Africa produced 1000 metric tons of gold, two-thirds of all annual production globally – has long since passed. More recently, growth in both gold mining and the wider gold market has allowed the industry to increase its contribution to global economic growth very substantially – with gold mining’s economic value having grown sevenfold since 2000.

We will explore the implications of this growth on host nations and communities in future blogs, but looking at the global trend, our recent findings indicate that sustained growth in the economic contribution from gold mining often coincides with an improvement in the income status of host nations. While gold mining is very unlikely to be the sole driver of these beneficial changes, our findings strongly suggest that in many cases the value it creates will have made a very important contribution.

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