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Gold supply from mines rose to about 2 652 tonnes in 2010 , the second year of production gains after a steady decline in output from 2000 to 2008. In the past two years, mine production has risen by 10%. Although changes to mine supply have an impact on gold prices, they tend to have less impact than shifts in above-ground inventories of gold, which is estimated at approximately 170 000 tonnes.

Compared to this figure, the rise in global mine production, amounting to 69 tonnes last year, was not significant enough to have influence gold prices. The main sources of gold supply in previous years, namely central bank sales and recycled gold supplies, have declined despite the strong increase in the average gold price. Central banks became net buyers of gold in 2010, after 21 years of net sales. In addition, the supply of recycled gold which tends to rise with increases in average gold prices, declined as investors held on to their gold in expectation of even higher prices.

Total gold supply in 2010 thus increased by only 0.5%, despite the sharply higher mine production. Whilst mine supply is expected to continue to increase year-on-year as some of the increased exploration and project spending over the last decade comes on-stream, the lower central bank contributions and expected stable recycled gold flows mean that total supply growth is expected to remain modest .

Demand for gold reached a 10-year high in 2010, driven by a strong momentum in Chinese gold demand, the revival of demand for jewellery in Asia and continued central bank buying. Highly sensitive to geo-politics, gold prices have reacted to concerns about the Eurozone sovereign debt crisis, the tensions spreading in the Middle East this year as well as escalating tensions on the Korean Peninsula. This positive gold price development is widely expected to continue as central banks, particularly in Asia, are expected to diversify their foreign exchange reserves further by increasing their holdings in gold, and inflows into gold exchange traded funds will continue to increase. The reason for this is that investors are seeking to protect themselves against the twin threats of deflation and inflation.

In addition, the impact of de-hedging by producers over the past decade has been seen to be a key factor which has supported the recent rise in gold price. This de-hedging process is now coming to an end as the largest producers such as AngloGold Ashanti in South Africa, have become un-hedged producers. Whilst there has been some hedging taken on during 2010, mainly for the purpose of project development, this means that gold price development is now more driven by physical supply/demand issues and economic and monetary considerations, rather than by speculative movements deriving from hedging.

A pre-requisite for global supply growth is a steady flow of large new mines. These are very capital intensive and often located in high-risk regimes. Small and mid-size projects in low-risk regions became attractive propositions a few years ago, and the turmoil in the financial markets further enhanced the value of projects and companies with low debt gearing. Endomines is therefore exceptionally well-positioned to benefit from the above trends, both in terms of the timing of the Pampalo Gold Mine and its capital structure.

Figure. Gold price development in USD and EUR. Source:

Gold Trade

The global gold trade occurs mainly directly between different market participants. Trade occurs through spot transactions and different forms of derivatives. Markets are open day and night with the main centres for trade in London, New York and Zürich. The main actors are central banks and mining companies. In Dubai and other Far East cities there occurs trade in smaller scale, too. The trade can occur by telephone as well as by electronic trading system.


As a result of the improving world economy, the market demand for ilmenite is expected to grow, and the gap between demand and supply is expected to shrink at a faster pace than previously has been anticipated.

Ilmenite is used primarily for the manufacture of pigment used in paints. The consumption of paint per capita is expected to increase in emerging economies such as China and India, which will contribute to increased ilmenite prices in the near future. New mines will be developed, but it is generally accepted that the development of these will take longer than expected.

Meanwhile, real prices for titanium dioxide have seen downwards pressure for the past two decades, leading to cost pressures on raw material producers. All this together has resulted in insufficient returns on investment for the replacement of mined out mines - particularly for those companies having other investment options.

Some of the major deposits that have been in operation since the 1960’s are now approaching their end of production life. The market volumes being supplied by the long-term producers is rapidly decreasing. The costs of exploration and mining activities are increasing, and the time from discovery of a deposit to full production often reaches ten years.

The world’s biggest manufacturers of titanium pigment are Dupont, Cristal Global, Tronoxl, Huntsman Tioxide, Kronos, ISK, Sachtleben. Kalvinit’s potential customers are mainly located in Europe and consist of the European pigment manufacturers which use sulphate process. These are Sachtleben (Finland, Germany), Huntsman Tioxide (England), Tinfos (Norway), Percheza (Czech) and Zaklady Chemiczne Police (Poland).

Ilmenite production is distributed in the following way: Australia 46%, Norway 13%, Ukraine 12%, USA 8%, India 8%, China 4%, Others 9%.


Figure. Global ilmenite deposits.

The potential demand for ilmenite concentrate in Europe totals 1 000 000-1 250 000 tonnes of which Kalvinit’s planned production could cover 250 000 tonnes. Also Kronos International from Norway uses ilmenite and owns a mine in Norway which covers its own demand. Kronos Interantional sells also around 550 000 tonnes ilmenite per year to external customers. The remaining part is imported from Far East, Australia and Africa.

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