Gold Production On The Cusp Of Peaking

Authored by Tom Lewis via GoldTelegraph.com,

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 Outdated equipment and technology need to be replaced.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.

Comments

38BWD22 tmosley Tue, 05/29/2018 - 20:38 Permalink

 

[general comment]

 

Because of gold's very high stock:flow ratio (much higher than any other commodity), it matters little in the next several years what gold production is.  If you want gold, just pay a little more, there's a lot of gold all around the world.

Until someone defaults on the physical...

In reply to by tmosley

Demon Slayer Wrenching Away Wed, 05/30/2018 - 07:09 Permalink

5000 KILOMETER DEEP MINES....this is an IQ test, just like Climate Change, Vaccines, GMO's, and the PEAK OIL bs a couple of decades ago.....and the COMING ICE AGE from the 70's.

5000 KILOMETER DEEP MINES.....LOL

That's 1000 KM's deeper than the 3rd hell....they're filtering that gold from molten rock.....with the help of those beasts from the LORD OF THE RINGS.

In reply to by Wrenching Away

Manipuflation tmosley Wed, 05/30/2018 - 00:25 Permalink

Why don't you go spend your millions of bitcoins and just fuck off to nirvana then tmosely?  Why the fuck do you care what we buy so much?  Your bitcoins don't shoot bullets.  That's what you are afraid of.  You are the kind of guy what can't even figure out how to change a lightbulb so you need to hire someone to do it for you.  Yep, you are the kind of guy who will end up broke.

In reply to by tmosley

Silver Kiwi RAT005 Tue, 05/29/2018 - 21:31 Permalink

The distance to the center of the Earth is 6,371 kilometers (3,958 mi), the crust is 35 kilometers (21 mi) thick, the mantle is 2855km (1774 mi) thick — and get this: the deepest we have ever drilled is the Kola Superdeep Borehole, which is just 12km deep.

I doubt that mines are going 3,000 5,000 and 10,000 kilometers deep. Someones got their sums wrong

 

 

 

In reply to by RAT005

flash338 Silver Kiwi Tue, 05/29/2018 - 22:12 Permalink

Yep, lots of typos. I could have written a better article. I miss the old zero hedge. 

If I had written my version of this shit article I would have titled it "Peak Gold  (at current prices)". The miners are mining multiple times more than they find every year and have for some time. Grades have declined something like 50 percent in 15 years. There is also a fare amount of sub-economic resources drilled out that has been written off, disregarded, or hibernating in juniors waiting for higher prices.

In reply to by Silver Kiwi

Beatscape johngaltfla Tue, 05/29/2018 - 20:12 Permalink

These types of arguments, 'The earth’s easy-to-find gold has already been found and mined', and, 'known mineable gold reserves may be gone in 20 years', etc... are far more applicable to crude oil from the standpoint that crude oil is refined and burned never to be recovered, whereas essentially all gold ever mined is still right here with us because (1) it's so precious and (2) it doesn't oxidize or even tarnish.  

To use these types of arguments to promote gold, my sensors indicate the presence of flimflam man. 

 

In reply to by johngaltfla

johngaltfla Beatscape Tue, 05/29/2018 - 20:15 Permalink

No doubt. It's the mining AND extraction process which is expensive due to most countries adopting tougher environmental regulations regarding metals mining. If it costs $2,000 per oz. to extract, then no sane company will attempt to dig it up. At $900 per oz., plenty of miners rocking and rolling. It just depends on the country and the conditions set forth by the regulators.

In reply to by Beatscape

SILVERGEDDON 10mm Tue, 05/29/2018 - 20:02 Permalink

Better change them kilometers back into meters.

Ain't nobody hard rock mining 5000 kilometers deep - that's roughly 3000 fucking miles.

Fucking ass hat retard snowflake bullshit propaganda editing team fucks up again. 

Buy it and hold it though. It spends better than inflation ravaged fake FED fiat clown bux.

In reply to by 10mm

TradingTroll Tue, 05/29/2018 - 19:58 Permalink

Well Gold has dropped from $1900 to $1300, on a good day. This ‘continuing demand for gold’ against lower production must be ‘continuing declining demand for gold’.

In which case, when gold hits $600, the story will be the same.

 

Since gold cannot rise against extreme geopolitical tensions then it must fall against its nemesis, Mr Powell (and by extension the USD).

 

 

Cluster_Frak Tue, 05/29/2018 - 19:58 Permalink

Drill baby drill in the Antarctic. There are plenty of resources yet to be discovered, the only question is the price. Supply / Demand baby, if you demand it at the right price, we shall supply it at the right price.

Anything else is just doom porn, as I am sure there is plenty of gold on Mars were Marxist Musk is heading.

 

Edit: based on the past analyst valuations, the current gold price is in its long term price (expected cost of production at 2011 price level = market price); hence they were correct and the market is in balance. Nothing to see here.