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Australian Mines Are Running Out of Gold

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Australian mines are running out of gold, according to a report by S&P Global Market Intelligence.

Analysts say Australia sits poised above a “production cliff.” The country could slip from the world’s second-largest gold producer to fourth by 2024.

The Australian gold mining industry faces the same problem as South Africa’s – aging mines.

S&P Global Market Intelligence research analyst Chris Galbraith said Australia’s biggest gold mines are getting older and not enough new discoveries are being made to replace them.

Those have been great mines, they’ve had excellent lives, but nevertheless all good things must eventually come to a close and they are running out of gold.”

South Africa gold production has been in a similar downward spiral for several years. Although the country still ranks eighth in the world in gold production, it continues to rapidly fall down the list of leading gold producers.  South Africa once led the world in gold production, but the country may run out of gold within four decades, according to the Environmental Economic Accounts Compendium published by African Statistics Day. Analysts say that at current production levels, South Africa has only 39 years of accessible gold reserves remaining.

Galbraith projected global gold output will increase this year to approximately 109.6 million ounces (3425 tons), but Australia’s woes are part of a broader trend of slowing output. Gold production rose fractionally in 2018 by about 1% totaling 3,346.9 tons. It was the 10th year of increased production, but output appears to be plateauing.

According to a report by S&P Global Market Intelligence earlier this year, while gold production will increase marginally over the next three years, there are troubling signs on the horizon. In fact, some analysts project gold output in several key countries, could slump to “generational lows” in the midterm.

Over the last couple of years, several prominent gold mining executives have warned we have found most of the world’s minable gold. For instance, last year, Goldcorp chairman Ian Telfer said, “We’re right at peak gold here.”  And during the Denver Gold Forum in September 2017, World Gold Council chairman Randall Oliphant said he thought the world may have already reached that point. Franco-Nevada chairman Pierre Lassonde has also indicated he expects a significant dip in gold production in the coming years.

Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year.

The biggest problem facing miners is the lack of new discoveries. Gold production has plateaued before, only to rebound and reach new peaks. Production has hit all-time highs and then gone into sharp decline at least four times in the past. The difference this time is that we’ve had a three-decade decline in the discovery of new gold deposits despite increases in exploration funding. CFRA Research analyst Matthew Miller told Deutsche Welle that gold miners are struggling to grow reserves in line with production.

The largest and most prolific reserves have already been found.”

Analysts say the quality of new deposits has also been in decline. Hardly any qualify as “world class,” defined as “large high-grade deposits with over 5 million ounces of gold reserves that can be turned into profitable mines capable of producing over 250,000 ounces of gold.”

Whether or not you think we’ve reached peak gold, you should never lose sight of the most basic fundamentals – supply and demand. Analysts say the gold industry may well be entering a long-term — and possibly irreversible — period of less available gold. As mining companies find it more difficult to pull gold out of the earth, it will mean less gold for refiners to produce for the consumer market. Remember, gold gets its value from its scarcity.

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