Gold Mine Output Has Flatlined

Gold mine output has flatlined over the last several years and that trend appears to be continuing in 2019. In fact, some analysts believe we may be at or near “peak gold.”

According to the World Gold Council’s Gold Demand Trends Q3 report, gold mine output fell slightly with total mine production coming in at 877.8 tons in Q3. On a year-to-date basis, mine production stands at 2,583 tons. That’s virtually identical to production levels at this point in 2018.

Global gold mine output marked its 10th year of annual growth last year, but it continued to show signs of slowing. Gold production rose fractionally in 2018 by about 1% totaling 3,346.9 tons. That compared with 3,318.92 tons mined in 2017  — a modest 28-ton increase year-on-year.

Looking at the trend, we see signs of plateauing mine output over the last four years. According to the WGC, production was up 77.72 tons between 2015 and 2016, 33.92 tons between 2016 and 2017, and 28 tons between 2017 and 2018 and we’re on pace for little to no increase in 2019.

So, could this signal we’re at or near peak gold?

Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year. Some prominent people in the mining industry think we’re close to that point.

Over the last couple of years, several 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.

Last spring, a report in Deutsche Welle made the case that we’re approaching peak gold.

Of course, 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.  Gold miners are struggling to grow reserves in line with production.

Between 2010 and 2013, exploration budgets exploded, but gold discoveries dropped precipitously.

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.”

Mine grade – the amount of gold extracted per ton – has fallen from over 10 grams per ton in the early 1970s to around 1.4 grams per ton today.

South Africa provides a good example of rapidly declining output. Although the country still ranks eighth in the world in gold production, it continues to rapidly fall down the list of leading gold producers.  In fact, South Africa 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.

Whether or not we have reached peak gold is debatable. But there is no question that production has flatlined. No matter how you view it, 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.