Gold mining at its peak
Development of new mines is declining…
Gold production will decline compared to last year, according to new reports, prices will not hold last year’s record due to spending cuts on gold exploration following the sharp price slump after the bull market in 2011.
Global gold production was expanded for the 10th consecutive year in 2018, and the continued growth of artisanal and small-scale mining recorded another all-time high in emerging markets.
Listed mining companies are now facing a very realistic scenario of peak gold – a theory based on an analysis of the 1950s oil market that annual gold production rises and then finally falls, according to management consultants Wood Mackenzie.
Gold mining stocks outperformed profits in 2019, with a 26% increase since the beginning of the year on the Arca Gold Index compared to a 21% gain on physical gold.
The amount of energy generated by crude oil increased by 16% thanks to technological progress.
After the price high in 2011, exploration budgets were drastically cut, according to Wood Mackenzie, and have not been replenished since.
According to a separate analysis of data from S&P Market Intelligence, gold mining operations fell by a quarter last month after doubling in August.
Gold continues to dominate the mining sector, with 7 out of 13 production projects listing gold as their first natural resource.
“The small upturn in gold production observed in recent years has focused primarily on the expansion and development of brownfield (i.e. existing) projects,” writes Wood Mackenzie.
“This was not sufficient to sustain existing gold production, so it is realistic that peak production has already been reached.
The average life of a gold mine worldwide is about 11 years. When gold prices reached their annual record in 2012, it was still 16 years.
Although there have been no negotiations with China in 2019, the number of takeovers in the gold mining sector has increased sharply as opposed to gold exploration. Over the past 12 months, there have been two megafusions in the industry, with the number 1, Barrick and No. 15 Randgold to Barrick Gold and No. 2 Newmont and No. 4 GoldCorp to Newmont GoldCorp.
On Wednesday, both companies were valued at $32.6 billion on the New York stock market. “Both companies have a miserable balance sheet as gold production per share declines more and more,” wrote independent consultant Metals Focus this summer in a commentary on the takeover debacle at Barrick and Newmont.
This indication was shown at Randgold resource presentations because it is a key differentiator in productivity.
According to Wood Mackenzie, the trend of takeovers in the gold mining industry will continue, “especially among mid-range gold producers” who want to secure their position in the industry.