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Dr.

Luis A TERCERO ESPINOZA

Gold
A raw material profile compatible with the assessment of the EU Ad-hoc Working Group on Defining Critical Raw Materials

Karlsruhe, 9 November 2011

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Gold

This work was commissioned by the European Association of Mining Industries, Metal Ores & Industrial Minerals (euromines), Brussels/BE.

Contact: Dr. Luis A. TERCERO ESPINOZA Coordinator of Business Unit Systemic Risks Competence Center Sustainability and Infrastructure Systems Fraunhofer Institute for Systems and Innovation Research ISI Breslauer Straße 48 76139 Karlsruhe Germany Tel. +49 721 6809-401 | Fax +49 721 6809-135 luis.tercero@isi.fraunhofer.de http://www.isi.fraunhofer.de

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1.1

Introduction

Gold (Au, atomic number 79) was one of the first metals to be worked by man. As a noble metal, it is resistant to air, humidity and a variety of acids. 197Au is the only naturally occurring isotope and it is found almost exclusively in its elementary state. With hardness on the Mohs’ scale of 2.5, pure gold is relatively soft compared with other metals. It is also the most ductile of all metals. To increase hardness and other mechanical properties gold is often alloyed with other metals, for example silver, copper, nickel and platinum among others. Due to its softness, gold can be highly polished which, together with its color and noble characteristics, makes it a treasured material for jewelry.1 The melting point lies at 1064°C and the density of 19.32 g/cm 3 is very high.2 Besides the naturally occurring stable isotope, the radioactive isotope 198Au (half-life 2.7 days) plays an important role for medical radiology.3

1.2

Basic Supply & Demand Statistics

Gold is one of the rarest metals in the earth’s crust. Estimations about quantities are difficult since the metal is distributed widely, but very unevenly. Reported figures for the average gold concentration in the earth’s crust vary around 4 to 5 ppb.1 Gold occurs almost all over the world and is produced in a large number of countries. This low regional concentration is shown by a comparatively low Herfindahl-Hirschmann index (HHI) < 1000 (see time series plot at the end of this profile).4 Gold occurs in different sorts of deposits. These are classified into primary deposits, secondary deposits (also called placers) and conglomerate deposits. The secondary
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Ullmann’s Encyclopedia of Chemical Technology: Gold, Gold Alloys and Gold Compounds. Wiley-VCH Verlag, Weinheim, 2005 By comparison, the density of iron is 7.87 g/cm (Ullmann’s Encyclopedia of Chemical Technology: Iron. Wiley-VCH Verlag, Weinheim, 2009) Römpp Online: Gold. Georg Thieme Verlag, Stuttgart, 2011 Weber et al.: World Mining Data, Volume 25. Vienna 2010.
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deposits are deposits of gold particles where the gold was enriched by flowing water after weathering of primary rocks. They occur all over the world as they accompany hard rock deposits and have been the easiest available source of gold since ancient times. Recent studies imply that gold placers can be economic at a grade of 0.1 g/m3 or even lower depending on size and recovery. In primary deposits the gold particles remained in the place where they originally formed (presummably by hydrothermal processes). Such deposits have a greatly varying gold content and are related to almost all types of orogenic and volcanic processes all over the world. Conglomerate deposits are deposits formed by lithification and/or hydrothermal overprint of former placer deposits, where gold is distributed as fine particles. The most prominent conglomerate deposits are the Witwatersrand goldfields in South Africa, where a large fraction of today’s worldwide gold production comes from.5, 6 Gold is also produced as a byproduct of copper and silver smelting. Sea water contains gold in concentrations between 0.008 to 4 ppb, but this source is not economical yet.4 The gold reserves, i.e. the known and economically exploitable deposits (assuming current prices and technology) are estimated to be 51,000 tons, which is approximately 20 times the world production in 2008. The largest reserves are found in Australia (14%), South Africa (12%) and Russia (10%).7 However, China was the leading gold producer in 2008, with a share of 12% of the worldwide production, followed by the USA (10%), Australia and South Africa (both 9%).8

Reserves in t, 2010 (USGS 2011) USA Australia Brazil Canada Chile China Ghana Indonesia 3.000 7.300 2.400 990 3.400 1.900 1.400 3.000 5,9% 14,4% 4,7% 2,0% 6,7% 3,7% 2,8% 5,9%

Production in t, 2008 (WMD 2010) 233 214 55 95 39 275 79 64 10,2% 9,4% 2,4% 4,2% 1,7% 12,1% 3,5% 2,8%

Imports to EU in t, 2009 (Eurostat) 0,1 0,0 1,9 0,0 34,0 1,6 2,4 0,0 0,1% 0,0% 1,3% 0,0% 23,4% 1,1% 1,7% 0,0%

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Ullmann’s Encyclopedia of Chemical Technology: Gold, Gold Alloys and Gold Compounds. Wiley-VCH Verlag, Weinheim, 2005. EUROMINES (2011). M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. Weber et al.: World Mining Data, Volume 25. Vienna 2010.

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Mexico Papua Guinea Peru Russia

1.400 New 1.200 2.000 5.000 6.000 1.700 NA NA NA NA NA NA 10.000 50.690

2,8% 2,4% 3,9% 9,9% 11,8% 3,4% NA NA NA NA NA NA 19,7% 100,0%

40 67 180 184 213 73 2 0 21 0 0 10 437 2.281

1,8% 2,9% 7,9% 8,1% 9,3% 3,2% 0,1% 0,0% 0,9% 0,0% 0,0% 0,4% 19,2% 100,0%

4,2 2,7 8,2 0,7 37,1 0,2 2,5 27,9 2,7 2,3 2,5 7,5 6,5 145,0

2,9% 1,9% 5,7% 0,5% 25,6% 0,1% 1,7% 19,2% 1,9% 1,6% 1,7% 5,2% 4,5%

South Africa Uzbekistan Burkina Faso Switzerland Kazakhstan Norway Singapore Suriname other countries Total

There is a large number of import sources for the EU, and the source countries vary strongly from year to year. Between 2004 and 2009, the EU imported gold from more than 40 different countries. The most important source among the gold producing countries was South Africa, which supplied constantly high shares of the EU’s gold imports (between 20% and 50%) in the last years. Smaller, but nearly constant quantities came from Suriname (around 5%). Chile and Russia are examples for countries with extremely changing trading rates. Chile accounted for 23% of the imports in 2009, but exported no gold at all to the EU in the three previous years. Russia, on the other hand, accounted for up to 18% of imports in 2005, but did not export gold to the EU in 2009. Switzerland plays an important role as a reseller for gold. Although Switzerland has no primary gold production, the EU imports large quantities (e. g. 47% in 2008) from this country. Smaller quantities are also produced within the EU. Most of the metal is produced in Sweden, Bulgaria and Finland (together accounting for more than 90% of EU production). The EU accounts for well under 1% of the world production and imports more than > 90% or the gold it requires. 9, 10

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Weber et al.: World Mining Data, Volume 25. Vienna 2010. British Geological Survey: European Mineral Statistics 2005-09. Keyworth, Nottingham, 2011.

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1.3

Economic Importance

Gold has both monetary and non-monetary uses. The distribution according to the World Gold Council is approx. 62% industrial use with the remainder being used for investment (excluding central banks).11 As an investment tool, gold is stored in the form of coins and bars. National banks of many industrialized countries possess large stores of gold, although gold is no longer (since 1978) an official part of national monetary reserves.12 The demand for gold as an investment tool increased with the rising price and the slowdown of the worldwide economy in the past years.13

62% 0% Industrial Investment excluding central banks

38%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gold uses 2010 62% 38%

In the context of this evaluation of criticality, only the industrial/manufacturing use is of interest. Thus, the relevant end-use structure of gold is as follows:

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World Gold Council: Gold Demand Trends, Second Quarter 2011. London, 2011. Römpp Online: Gold. Georg Thieme Verlag, Stuttgart, 2011 M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold.

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Jewelry: The majority of manufacturing gold consumption (83%) is used for jewelry.14 Because of its softness, gold is almost always alloyed with silver, copper or platinum group metals. Cheaper jewelry is often gilded using electrochemical processes.15 Gold consumption in this sector dropped in the last years due to rising prices.16 Electronics: this use represents 12% of gold consumption, together with electrical engineering.17 Its high resistance against oxidation and corrosion and its good conductivity are important properties for gold as a contact material in many electronic applications. Gold is used e. g. in diodes, transistors, integrated circuits and semi-conductor memories as well as in capacitors and resistors. Due to its high cost, gold is used in very thin layers in highly reliable components where other materials can cause problems by current-induced ion migration.18

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World Gold Council (2009) Ullmann’s Encyclopedia of Chemical Technology: Gold, Gold Alloys and Gold Compounds. Wiley-VCH Verlag, Weinheim, 2005 M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. Ullmann’s Encyclopedia of Chemical Technology: Gold, Gold Alloys and Gold Compounds. Wiley-VCH Verlag, Weinheim, 2005 M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold.

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Electrical engineering: High oxidation resistance, low ohmic resistance and low micro migration of gold and gold alloys are important properties for low voltage contacts in communication and information transfer applications. Other alloys are used as resistor material in corrosive environments, in potentiometers or in thermometers.19 Dental materials: Gold alloys are used in dentistry where they are valued for their resistance to normal conditions in the mouth, their homogenous structure and their workability.20 Nevertheless, gold consumption in this sector is slowly declining due to the development of new ceramics and cheaper base metal alloys.21 Coatings: Gold coatings are used on a variety of substrates, such as base metals, glass, ceramics or plastic to prevent corrosion and gas diffusion or for decorative purposes.22 Moreover, gold coatings are used in sunglasses.23 Gold leafs: Because of its ductility, gold can be formed to extremely thin gold leafs of a thickness of 0.2 μm. They are used for decorative purposes and for visual effects in beverages and food.24

The use of gold in homogeneous and heterogeneous catalysis is currently under study but does not constitute a significant fraction of demand.25,26

1.4

Resource Efficiency: Recycling & Substitution

As gold is a valuable raw material, it is recycled from nearly all the mentioned products. The technically easiest source for recycled gold is to remelt old jewelry and dental gold. Moreover, gold is recycled from old and new electronic scrap as well as from metal

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M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. Ullmann’s Encyclopedia of Chemical Technology: Gold, Gold Alloys and Gold Compounds. Wiley-VCH Verlag, Weinheim, 2005 M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. Römpp Online: Gold. Georg Thieme Verlag, Stuttgart, 2011 Römpp Online: Gold. Georg Thieme Verlag, Stuttgart, 2011 Ullmann’s Encyclopedia of Chemical Technology: Gold, Gold Alloys and Gold Compounds. Wiley-VCH Verlag, Weinheim, 2005 Römpp Online: Gold. Georg Thieme Verlag, Stuttgart, 2011

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coatings.27 About one third of the current demand is covered by recycled gold (old and new scrap).28 The largest fraction of recycled gold comes from jewelry and coins, which represent the largest use of gold (see Section 1.3) and have a 90-100% end-oflife recycling rate. The end-of-life recycling rate is also high in industrial applications. All other uses have recycling rates below 20% and represent a small portion of gold use.29 Besides recycling, the reduction of used quantities without losing performance is an important factor for economical and sustainable use of the precious metal. Especially in electrical and electronic applications, but also in jewelry, thinner coatings are used to reduce costs without losing the favorable properties of gold.30 Substituting gold in its main applications is rather difficult for different reasons. In jewelry, gold can be replaced by other precious metals or by cheaper alloys since it has no technical function. However, considering its status as a symbol of luxury, it can be expected that a large scale replacement of gold in this sector would be difficult regarding consumer acceptance. A substitution in electronic and electrical applications is often not possible or difficult because of the unique surface properties mentioned above. Palladium and platinum may come into consideration31, but were not considered economical in the past as the prices for these metals were higher than for gold. This has changed recently due to the large increase in gold price and may lead to substitution in the electronics sector. Silver is often not a good substitute because of ion migration leading to a reduced reliability of the device. In many smaller industrial applications gold is also indispensable. Only as a dental material, gold is increasingly being replaced by ceramics and cheaper base metal alloys.32

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http://www.edelmetall-recycling.de/goldrecycling/ World Gold Council (2009) UNEP (2011) Recycling Rates of Metals – A Status Report, A Report of the Working Group on the Global Metal Flows to the International Resource Panel. Graedel, T. E.; Allwood, J.; Bilrat, J.-P.; Reck, B. K.; Sibley, S. F.; Sonnemann, G.; Buchert, M.; Hagelüken, C. M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. M. W. George. US Geological Survey Mineral Commodity Summaries 2011: Gold. World Gold Council (2009)

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1.5

Specific issues

The gold price has increased rapidly in recent years, from a level around 300 US$/oz at the turn of the century to around 1500 US$/oz in mid 2011.33 This price increase has reasons beyond the use of gold in manufacturing; i.e. there is a considerable influence from the use of gold as an investment tool. An increasing relative importance of gold use (on a tonnage basis) in investment is a particularly important aspect of global gold demand, as shown below: 34
4500

Global gold demand, tonnes

4000 3500 3000 2500 2000
1500 1000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Investment

Technology Jewellry

Unfortunately, this aspect of gold demand cannot be considered quantitatively within the criticality framework used here, which measures the economic importance of a raw material based on its manufacturing use. Concerning the manufacturing use of gold, the declining demand for gold in jewellry and increasing demand for electronics have led to an overall increase of the importance of technology demand, as shown below: 35

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The quoted price is London PM fix. World Gold Council (2011): http://www.gold.org/investment/statistics/prices/

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World Gold Council: Gold Demand Trends, Second Quarter 2011. London, 2011. World Gold Council: Gold Demand Trends, Second Quarter 2011. London, 2011.

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Global gold demand

100%

80%
60% 40% 20% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Technology Jewellry

The primary production of gold, which accounts for more than 70% of world supply, is tied to the use of cyanide to extract gold from ores of different grades. This is currently the preferred method worldwide, both for economical and environmental reasons.36 However, gold producers are directed to keep cyanide levels e. g. in tailings ponds to the lowest possible level in view of its well-documented harmful and toxic effects.37 In the wake of a large accidental spill of cyanide-containing tailings in northern Romania in January 2000, the United Nations Environmental Programme and the former International Council of Metals and the Environment called a symposium with the goal of creating a unified international management protocol for the use of cyanide in the gold mining industry. Following this, a set of Principles and Standards of Practice were published in 2003, and 14 companies became the first signatories to the “International Cyanide Management Code for the Manufacture, Transport and Use of Cyanide in the Production of Gold” in 2005.38,39 As of September 2011, 31 companies are signatories to the “Cyanide Code”.40

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COM(2000) 664 final: Safe operation of mining activities: a follow-up to recent mining accidents (Communication from the Commission). Brussels, 23 October 2000. Directive 2006/21/EC of the European Parliament and of the Council on the management of waste from extractive industries and amending Directive 2004/35/EC, 15 March 2006. Mudder (2008): Doing the right thing. International Mining, September 2008, p.134. Garcia (2009): An introduction to the International Cyanide Code. XXVIII Convención Minera Internacional, AIMMGM AC, Veracruz/MX, 28-31 October 2009. International Cyanide Management Institute (2011): Code Signatories. http://www.cyanidecode.org/signatorycompanies.php. Washington, DC/USA. Accessed 28 September 2011 (Last updated: September 19, 2011).

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Use
Jewelry Electronics & Electrical engineering Dental materials Other industrial (Coatings, Gold leaf)

Share Megasector
83% Other Final Consumer Goods 12% Electronics & ICT 2% Pharmaceuticals 3% Metals

Subst.
0,7 1,0 0,3 1,0

Substitutability index Recycling rate (recycled content from old scrap) Import Dependence

0,74 25% 91%

Results
Economic Importance Supply Risk Environmental Country Risk 4,2 0,2 0,1

HHI-Development
10.000 9.000 8.000 7.000 6.000 5.000 4.000 3.000 2.000

1.000
1985 1987 1988 1991 1992 1995 1996 1998 1999 2000 2002 2003 2004 2006 2007
1986 1989 1990 1993 1994 1997 2001 2005 2008 2009

0

Source: Weber et al.: World Mining Data, Volumes 25 and 26. Vienna 2010 and 2011 for 1994-2009. Previous data of similar quality courtesy of L. Weber / bmwfj.