Gold Production to Drop By 50%; Few New Discoveries Will Exacerbate Problem (+3K Views)

The amount of gold becoming available for production in the near term will be well under 50% of that currently being produced and the longer-term downward trend in discoveries will likely continue for at least the next few years.

The above introductory comments are edited excerpts from an article* by Lawrence Williams (mineweb.com) originally entitled SNL points to drastic fall in new gold discoveries.

The following article is presented courtesy of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.

Williams goes on to say in further edited excerpts:

SNL Metals & Mining, one of the sector’s leading suppliers of statistical information, …points in its latest major report titled Strategies for Gold Reserves Replacement to some hugely significant data which will affect global newly mined gold production way into the future.

• over the past 24 years mining companies have discovered some 1.66 billion ounces of gold in 217 major discoveries, BUT – and it’s a big BUT – while this may sound a huge amount, over the same period the industry has actually produced 1.84 billion ounces of gold, so discoveries have not been keeping pace with production,
• the number of significant discoveries (defined as deposits with a minimum of 2 million ounces of contained gold) is diminishing and this diminishing trend seems to be accelerating. In the 1990s some 124 deposits containing 1.1 billion ounces of gold were discovered while since the year 2000 this has fallen to only 605 million ounces in 93 such discovered deposits and, most recently, significant new discoveries appear to have slowed to a trickle,
• the amount of potential production from these major discoveries is particularly concerning when looking at the discoveries made in the past 15 years. Assuming a 75% rate for converting resources to economic reserves and a 90% recovery rate during ore processing, the 674 million ounces of gold discovered since 1999 could eventually replace just 50% of the gold produced during the same period and that
  • many of these deposits face significant political, environmental or economic hurdles, so, together with only perhaps a 75% conversion rate for resources to reserves and a possibly optimistic 90% metallurgical recovery rate, the amount of gold becoming available for production in the near term [will be] almost certainly well under 50% of that currently being produced.

The chart below demonstrates this shortfall in discoveries very well and shows that despite the big rise in gold price so far this century the amount of new gold discovered over the same period has dropped off dramatically over the past few years.

• nowadays it is taking far longer to bring a new deposit from discovery through to production.  SNL estimates that the 63 projects now in the pipeline and scheduled to begin production between 2014 and 2019 are expected to take a weighted-average 19.5 years from the date of discovery to first production.  The trend is also getting worse [for the following reasons]:
  • the need for increased and more detailed feasibility work,
  • hurdles imposed by greater social and environmental awareness,
  • longer and more demanding permitting processes,
  • increased need for infrastructure and processing capacity due to lower ore grades and/or more remote locations,
  • limited availability of capital, and
  • scarcity of experienced personnel.

• as it can take several years of exploration for a new discovery to be defined, it is too early to tell whether any surge in discovery-oriented exploration since 2010 has moderated the downward trend in the number and richness of new discoveries…
• the tough financial environment for junior explorers over the past two years suggests that the longer-term downward trend in discoveries will likely continue for at least the next few years…

Conclusion

[While] global gold output…[is] being maintained (just) at the current time, the SNL research suggests…that:

• unless there is some significant change in the rate of new discoveries, it will inevitably start to drift downwards in the relatively near future and this drift will likely accelerate [and that]
• even if exploration activity is stimulated upwards by perhaps much higher gold prices, this can have little immediate impact purely because of the enormous lead times it is now taking to get a new discovery into production.

The SNL research, like all research of this type, [has its limitations but it] does indicate a serious trend which is certain to significantly impact the global gold/supply equation in the years ahead. 

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=247986&sn=Detail

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