Gold Production On The Cusp of Peaking

Gold is valuable because it is a finite resource. What happens when all available gold is mined and processed? There is still abundant gold deep within the earth, but it has not yet been found. Mining companies are unable, to dig deep enough. It is difficult for them to know where to locate this deep gold. All known locations have been depleting for years.

That is the reason mining gold has become more difficult and output is expected to begin decreasing steadily. The precious metal is becoming harder to find.

Most of the world’s gold was mined before the 1848 Gold Rush era. Since 1950, 125,000 tons of gold has been processed, which is approximately two-thirds of all gold ever mined. All of the gold that could be accessed easily has been mined.

Gold cannot be manufactured or created. It can only be mined from the earth’s crust. If we want more gold, companies, and investors will need to begin allocating more capital to exploration companies.

According Eugene King of Goldman Sachs, known mineable gold reserve may be gone in 20 years. The definitive word here is “known.” Gold mining companies are gearing up for a new era of exploration deeper below the surface than ever before. This means these companies will be incurring new costs at the same time their profits are decreasing. That is the reason why so few new mines are being excavated and few new projects are being started.

The earth’s easy-to-find gold has already been found and mined. There will not be another California Gold Rush. The search for new gold becomes increasingly challenging and expensive each year. Outdated equipment and technology need to be replaced.

To add to the problem, the lead time between discovery and production of a new gold deposit is 20 years. Much of this is due to jurisdictional, local policies. Global reforms could remove many of the current obstructions.

Mining companies are looking for new sources while using new technology, but many are folding due to the expense involved. If this trend continues, the finite nature of gold will ensure its price skyrockets.

Ian Telfer,Chairman of Goldcorp., indicates we have reached “peak gold” as he states, “We’ve found it all.” He anticipates future gold production to be lower than in the past. He sees all future gold mining as going as a downhill venture. Mr. Telfer believes there is a good possibility that all major sources of gold have already been found and mined. New grades being extracted are declining in value. He predicts this situation could drive the price of gold up to $1,600 by the end of the year from its current price of around $1,300.

In 2015, Goldcorp. produced 3.4 million ounces of gold. In 2016, the amount fell to 2.8 million. In 2017, its gold production fell to 2.5 million ounces. Other mining companies are experiencing similar decline in production of gold. It’s an industry-wide problem.

South Africa, a major gold producer, has seen a decrease in production since 2015, as well.

Vitaly Nesis, CEO of Polymetal, believes the fourth quarter of 2017 was the peak point for gold. He anticipates supply to fall up to 20 percent by 2022.

Others agree. Randall Oliphant, chairman of the World Gold Council, predicted “peak gold” in 2017. Lower gold prices in the past have made it too expensive to explore new mines. In the meantime, known sources are drying up quickly

New and innovative means of finding viable deposits are needed. Goldcorp. has followed the lead taken by the oil and gas industries and is using IBM’s Watson to analyze new data in an effort to make exploration for gold more efficient. The cost of using Watson’s algorithm is costing the company approximately $10 million. One can only hope the new technology brings about badly needed results.  

The fact is, new gold discoveries have not kept pace with the continuing demand for gold. During the past 18 years, mining companies have invested $54.3 billionon exploration. Yet, there have been only 41 discoveries producing only 215.5 million ounces of gold. The demand for gold will increase significantly as it becomes more scares.

Exploration is continuing, however, Newmont Mining, based in Colorado, has designation $1.3 billion toward expanded projects. Australia’s northern gold fields have been depleted, and companies are digging to new depths using new and expensive technology. Drilling is breaking records at 3,000 kilometers below the surface. Australia’s Gwalia mine is hauling gold from 10 kilometers below and will begin to use hydraulic hoisting equipment. These are record depths, and to continue mining for new gold, mining companies will have to dig deeper still. Gold mines in South Africa have reached down to 5,000 kilometers.

The anticipated increase in gold prices could benefit gold mining corporations, since finding a new source would be increasingly profitable. That is the reason why, while gold may be harder to find, mining companies are anxious to continue exploration in new areas. They know the price of gold has only one way to go – up. But first, mining companies must invest in new technologies, such as Watson, to help explore in places that are unreachable at the present time.