Well-known mining geologist Keith Barron, Chairman and CEO of Aurania Resources, tells us that with the average goldmine worldwide extracting gold below 1 gram per ton, peak gold is probably here and that, unlike oil, there isn’t any new technology that makes finding it or extracting it any easier.
No New Tech Coming, Peak Gold Is Probably Here
Similar to what we’ve seen in the oil markets with fracking, past innovations helped make extracting marginal gold deposits economical. Now, however, the low-hanging fruit is gone, Barron stated. An average gold mine worldwide is extracting gold at below 1 gram per ton and there isn’t a lot of economic wiggle room if deposits are yielding less than that.
As a result, large operations have emerged that rely on open-pit mining and economies of scale to reduce costs. If the gold price dipped down, however, operations such as these would be in trouble, Barron noted, because the margins are very thin.
It’s doubtful that we’ll see any technology emerge that would make lower grade ore bodies pay more efficiently, Barron noted. The only thing he sees down the road is more recovery operations.
There has been talk of Peak Gold for several years, Barron stated, and the numbers indicate we will reach it this year or next. After this point, production profiles start to fall worldwide.
Upsurge in Activity
When the gold price declined after 2012, there wasn’t much going on in exploration, but conditions are improving now.
We’ve seen an upsurge in activity over the last 8 months, Barron noted, especially by the juniors, less so in the mid-tiers and the seniors. Nevertheless, there are a lot of new drill results coming out from projects all over the world.
“It’s coming back,” Barron said. “It’s not exactly where it was in the boom times of 2005 and 2006, but I think it’s heading in that direction.”
To some extent, the run-up has been fueled by the rise in gold prices after bottoming in late-2015, but it’s also due to the realization that the majors are going to have to replace their reserves.
