Presentation at the NewGenGold Conference, Perth, 12-13th November 2019
Presentation:
The following updates a previous paper and presentation given by the author at the 2015 NewGenGold Conference (a copy of which can be found elsewhere on my website) … and is useful to see what has changed in the last four years).
In detail:
- In 2012 global expenditures for gold reached an all-time high $11.8 billion. Since then, expenditures have dropped 63% to $4.44 billion in 2019. Australia has done OK (down by only 22% in US$ terms, zero fall in local Dollar terms), but other countries have been impacted by savage cuts – with Canada down 66% and China down by 78%
- Over the last decade (2009-2018) $67.5 billion (in constant June 2019 Dollars) was spent on exploring for gold. During that time 336 primary gold deposits (>0.1 Moz) were found, containing 508 Moz. A further 36 (mainly base metal) discoveries containing 133 Moz of by-product gold were also found – giving a total of 641 Moz.
- After adjusting for missing discoveries and factoring in the likely resource growth over time, 455 primary gold deposits were found over the last decade containing ~1061 Moz. Adding in by-product gold increases the total to 1290 Moz.
- Given the above, the average unit discovery cost for 2009-2018 was $62 per ounce of gold-equivalent (in constant June 2019 US Dollars). This is double the discovery cost for the previous decade – of $27/oz-eq for 2000-2009.
- The main reason for the sudden increase in cost was due a dramatic increase in input costs – such as drilling, labour, land access and administration. All of these have doubled in real terms between 2000 and 2012 – with the key driver being the inflationary effects associated with the mining boom, coupled with stronger currencies for Australia and Canada. With the subsequent end of the mining boom, exploration costs have largely reversed in recent years.
- Notwithstanding the above cyclical factors, structural factors (such as increasing depth, and additional costs of working in more remote areas) have pushed up costs. Underlying discovery costs are rising by $8/oz per decade
- the average depth of discovery for the World over the last decade was 66 metres – however half of the deposits found outcropped.
- In terms of discovery performance, some regions do better than others. In particular, Australia accounted for 9% of the exploration expenditures, 17% of the deposits (by number) and 14% of the total ounces. It also accounted for 22% of the Tier 1 & 2 deposits found.
- In terms of the value of discoveries made, versus the cost of exploration, the gold industry performed poorly over the last decade – achieving a notional “bang-per-buck” of only 0.46.
With regard to the future, it is noted that the amount of gold mined in the World rose from 36 Moz pa in 1975 to 105 Moz pa in 2018. This is set to rise further in the future. By comparison, over the last two decades the amount of gold discovered average 129 Moz pa. While this suggests that the industry is finding more gold than it mines it should be noted that, due to a range of factors, only 60-70% of gold found is extracted