[miningmx.com] – IT’S HARD to find a company on the Johannesburg Stock Exchange that busies itself solely with the task of discovering gold; Goliath Gold is one, but there aren’t many others – a trend that is mirrored throughout the world.
The reasons for this are obvious – the slump in the gold price since about 2013 – but the implications are surprising, according to a report by Standard Bank Group Securities analyst, Adrian Hammond.
He calculates that gold exploration spend will decline to about R4bn this year from some R10bn in 2010.
Perhaps more alarmingly, the success rate in finding new sources of gold has slumped in spectacular fashion – down to 200 million ounces in 2005 to a mere 10 million ounces in 2010.
What this means is the gold producers’ ability to maintain production will be compromised since levels of output have to be underpinned by a certain amount of available reserves and resources.
Standard Bank estimates that for every one million ounces of steady-state production some 23 milliion ounces of reserves are required and 46 million ounces of resources, the latter roughly defined as gold about which producers have less economic certainty. Since 2012, the reserves of the top 15 gold mining companies have declined about a fifth.
The outcome of this number crunching is that the world’s gold industry will reach a state of “peak gold’ by 2020, a milestone moment which marks the decline in global annual gold production.
Presumably, this will be when gold prices start to rise and, usually before that, the equities that are involved in producing it.
“We believe gold production could peak within the next five years if gold prices do not increase materially,’ said Hammond in the report.
“Trends in exploration and reserves; a lower growth outlook for Chinese production as well as a flat production outlook for the rest of the world do not bode well for global growth,’ he said.
“At spot gold prices, we think that 2020 could be the year for peak gold production, or what could be the “fifth production cycle’ dating back to the last 120 years,’ he said.
