Story: Gold and gold mining

Page 12. Gold and the economy

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Without gold New Zealand’s early economy would not have developed as quickly as it did. Gold attracted people, investment and shipping. Miners had to be fed and clothed and their thirst satiated. Breweries sprang up, roads and bridges were built, and infrastructure developed.

Industrial and economic growth

Once mining became mechanised and capital-intensive, foundries supplied metal piping for sluicing and gold dredges were built. Many engineering firms, including Thames’ A & G Price, had its start in manufacturing mining equipment. The Paeroa–Waihī railway was pushed through to get at the gold in places such as the Karangahake Gorge. The New Zealand stock exchange was seeded by money earned on the goldfields. And Dunedin’s dominance among New Zealand cities in the late 1800s was due largely to the yellow metal. The first supply of commercial power and electric light in the southern hemisphere occurred in 1888 at Reefton, a mining town.

Mining schools

Gold also paid for higher education. The Otago School of Mines had its origins when a furnace was built at the University of Otago for assay work in 1872. Other schools of mines were established at Waihī in 1885 and at Reefton in 1886, where Cornish miners shared their knowledge of gold and gold-mining techniques. These institutions were necessary, because getting gold from hard rock was more technical than the simple methods used in alluvial mining. Assaying work, which determined how much gold was contained in quartz samples, was the lifeblood of these schools. Accurate assay work was critical because it measured the richness of deposits – companies were floated on assay results. Mining companies were often overseas-owned and a large proportion of profits went back to England. Conversely, many companies never found gold, went bankrupt, and overseas investors lost out.

Honourable Roddy

The heaviest nugget officially recorded is the 2.81-kilogram ‘Honourable Roddy’, found at Ross in 1909 and named after the Minister of Mines, Roderick McKenzie. It was gifted to King George V at his coronation in 1911. In the late 1950s enquiries to Buckingham Palace as to what had become of it received an embarrassing answer – it had been melted down to make a royal tea service.

How much gold and silver?

Up to 2003, about 538,640 kilograms of alluvial and 368,544 kilograms of hard-rock gold had been produced in New Zealand. The total value (in 2003 terms) was US$116.32 billion.

A few large operations were responsible for most of the hard-rock gold. The Waiuta mine near Reefton produced 62,369 kilograms of gold between 1870 and 1951. The Martha mine near Waihī produced 311,845 kilograms of silver and 141,747 kilograms of gold between 1880 and 1951. New Zealand’s total gold output in 2003 was worth over $200 million and is expected to increase.

Profitable grams per tonne

Gold-mining economics relies on the price of gold – if the price rises sharply even low-grade deposits (if they are large enough) become economic to mine. If it drops then only the richer areas of the mine will be worth mining. There is a lot of gold in the ground, but it is mixed with worthless rocks. For a mine to be profitable the cost of mining must be lower than the value of the gold won.

For alluvial deposits near the surface a payable grade can be considerably less than 1 gram per tonne. For hard-rock sources mined in opencast methods, such as at Macraes Flat, around 1.6 grams per tonne is just profitable at 2005 prices. (Most grades are higher – the Martha opencast mine averaged about 3 grams of gold and 26 grams of silver per tonne.)

Underground mines, such as Golden Cross, must have richer grades to justify tunnelling expenses – typically grades must be around 8 grams per tonne or higher. (The planned underground mine at Favona will work a rich deposit – 1.1 million tonnes of reserves at 10 grams of gold per tonne.)

Amateur fossicking

Gold prospecting and mining are strictly regulated, but for those interested in fossicking with only a pan, shovel and sluice box there are 16 areas set aside for this in the South Island.

Acknowledgements to Bob Brathwaite (GNS Science) and John Barry.

How to cite this page:

Carl Walrond, 'Gold and gold mining - Gold and the economy', Te Ara - the Encyclopedia of New Zealand, (accessed 1 May 2017)

Story by Carl Walrond, published 12 Jun 2006