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Last Updated: Thursday, 26 May, 2005, 12:26 GMT 13:26 UK
Gold mining 'key to poor nations'
Gold Mine molten liquid being pressed into ingots at Ghana goldfield
Gold is precious to the infrastructure of poorer countries, says the WGC
Gold mining is becoming more and more important to many developing countries, the World Gold Council (WGC) has said.

In its report A Touch Of Gold the WGC said exports of gold from heavily indebted countries had surged by 84% between 1994 and 2004.

In 2004, developing countries produced 72% of the global output of gold.

"The gold industry is of tremendous and growing importance to highly indebted countries," WGC chief executive James Burton said.

Local reliance

The report added that as a result of increasing gold exports, heavily indebted countries - such as Mali and Ghana - were becoming increasingly dependent on the industry.

Gold is generally associated with the rich and yet this latest report proves that, in relative terms, it is actually much more important to the poor
James Burton
World Gold Council chief

As well as providing export revenues, the WGC said, the industry "brings substantial improvement" in social and financial infrastructure.

Most mining companies try to take on local workers and source supplies locally, while royalty and tax revenues from the business contribute to government coffers.

"For example, studies indicate that each mining employee in South Africa supports on average up to ten people," Mr Burton added.

"Gold is generally associated with the rich and yet this latest report proves that, in relative terms, it is actually much more important to the poor," Mr Burton said.

Big increase

In 2003, gold was the Mali's leading export - making up 59% of the goods sent abroad.

GLOBAL GOLD PRODUCTION 2004 (metric tons)
South Africa: 343
United States: 262
Australia: 258
China: 217
Canada: 129
Indonesia: 114
Ghana: 58
Tanzania: 48
Mali: 39
Guyana: 15
Source: GFMS

It was also the leading export for Tanzania (44%), Ghana (32%) and Guyana (26%).

The precious metal is also a key export for other low-income countries and countries at the lower end of the middle-income bracket.

Gold leads the list of goods shipped abroad from South Africa, Peru, Kyrgyzstan and Papua New Guinea - the report said.

Smaller countries are steadily taking market share from what were once known in the industry as the 'big four' producers, South Africa, Canada, Australia and the United States.

Gold production figures

Production in Tanzania has grown from five tons in 1995 to 48 tons last year while Mali's output has grown from eight to 39 tons in the past ten years.

"You have seen a tremendous increase in the output of developing countries in the past ten years and gold exports have become significant in terms of these countries' economies," said Paul Walker, chief executive officer of GFMS, a leading precious metals consultancy.

"The global production profile will continue to shift to these countries."

Reserves warning

The WGC also called on the International Monetary Fund not to sell its gold reserves as a means to fund debt relief for poorer countries.

The warning comes as the UK - as current head of the G8 group of the world's seven most industrialised nations and Russia - is calling on the IMF to sell some of its gold reserves to fund debt-relief plans.

However another G8 member, the United States, has opposed the move.

A worker in a Ghana gold mine
Gold exports are becoming more important for countries like Ghana

The WGC argued that such a move would devalue gold, and so come at a cost to poorer countries which rely on mining for their wealth.

"A $10 fall in the gold price will lose the heavily indebted countries as a group around $75m worth of export revenues," Jill Leyland, economic adviser to the WGC said.

Oxfam, which supports the sale of gold reserves to finance debt relief, said that the IMF policy has the support of leading African gold producers including Tanzania and South Africa.

"The IMF believes it can be done in a way that would not hurt the price and would not penalise these countries," said Oxfam spokeswoman Helen Palmer.




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