Gold Discoveries not Keeping Pace with Mined Production
“Then again, the economic viability of the discovered gold relies to a large extent on location, politics, capital and operating costs, and market conditions, which will inevitably further reduce the amount of resources that will reach production,” MEG stated.
Over the past decade, the top 26 glob-al gold producers (those that mined at least 600,000 oz of gold in 2011) collectively replaced almost 208% of the gold they produced. Individually, 21 of these pro-ducers added enough reserves through exploration and acquisitions to keep ahead of production, maintaining a strong pipe-line of projects to insure stable or in-creased gold production.
The major gold producers increased their aggregate annual production 17% over the past 10 years to 46.4 million oz, 57% of 2011 world mine production; and as of year-end 2011, these companies held sufficient reserves for 21 years of pro-duction at their 2011 rate.
However, increasing production exacer-bates the need to replace reserves, and most major producers forecast further pro-duction increases in the coming years that could increase the group’s share of the projected world mined total to 67% by 2017. Based on their 2011 production, each major producer already needs to replace an average of almost 2 million oz of gold in reserves each year, ranging from almost 8.5 million oz/y to less than 700,000 oz/y after factoring for recovery losses, MEG reports.
Just 14 of the 26 major gold producers made major gold discoveries between 1997 and 2011, accounting for about a quarter of the 743 million oz found. Today, the major producers and their majority-owned subsidiaries hold 39% of the reserves and resources in the 99 signifi-cant discoveries made in the past 15 years, having increased their share through acqui-sitions, which, after conversion to reserves and recovery losses, could amount to just 46% of the gold needed to replace their production from 2002 to 2011.
Despite the apparent shortfall in new discoveries, the biggest reserves replacement challenge faced by the major produc-ers and the industry as a whole is not that there is no gold left, but that all the “easy” gold has been found, MEG stated. Worldwide, the total gold in reserves and resources at development-stage projects is essentially equal to that in currently producing mines.
However, with increasing risk of politi-cal, regulatory, and tax instability in many resource-rich nations, declining grades, ris-ing costs, and dramatically longer develop-ment times, the amount of gold available for production in the near term is likely far less than has been found.
The MEG study addresses key growth strategy issues facing the gold mining industry and compares the relative costs per ounce of discovering or acquiring gold in the ground. The study provides an indus-try-wide review of the gold pipeline, acqui-sition activity, gold exploration spending, and major discovery successes, and a vari-ety of metrics for measuring and compar-ing the relative costs of various growth strategies for the 26 largest gold miners and the industry as a whole.
In addition, the study looks in detail at key industry indicators, such as the increasing time from discovery to produc-tion, the continuing decline in headgrades and reserves grades, and the ongoing trend of rising capital and operating costs.