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Gold shortage looms - MEG

Posted: Thu, 27 Jul 2006

[] -- GOLD supply shortages were possible in the long-term, according to recent research produced by Canadian research house, Metals Economics Group (MEG). It said in a press statement that recently discovered deposits of more than 2.5 million ounces, enough to attract the interest of major gold producers, were not adequate to replace their production.

The discovery rate of major gold deposits had declined in each of the last eight years, MEG said. Total world output of gold was 1.1 billion ounces from 1992 to 2005, about 1.8 times the new resources discovered in deposits larger than 2.5 million ounces, it said.

“To make the discrepancy even worse, by year-end 2005, only 52% of the discovered resources had been upgraded to reserves,” MEG said.

It said the shortage of projects large enough for the majors would continue to be ‘critical’. Declines in discoveries would be reversed, however, as majors increased their exploration budgets, and the number of intermediaries and juniors seeking new gold increased.

The world’s largest 20 gold producers had replaced 200% of their total production over the past eleven years at an average cost of $38/oz through acquisitions and exploration, MEG said. Gold production among the top 20 companies had also increased, MEG said. Combined annual gold production increased 70% to 43 million oz in the nine years to 2004, it said.

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The remaining production life of 14 years in reserves had, however, been maintained.

“MEG expects an average increase in mined gold production of about 3% annually from 2006 to 2010. This level of projected increase may be inflated further if current high gold prices prevail, and actual changes will of course depend on longer term gold market factors,” MEG said.