Gold Mine Production Up in 2021 But Below Pre-Pandemic Levels; Overall Gold Supply Falls

Global gold mine production increased in 2021 as economies opened up after the first wave of the coronavirus pandemic. But mine output did not recover to pre-pandemic levels, and overall gold supply fell for the second straight year.

According to data released by the World Gold Council, annual mine production increased 2% year on year, growing to 3,560.7 tons last year compared to 3,474.7 tons in 2020.

But even with the post-pandemic recovery, gold mine output in 2021 was still slightly below the prepandemic level in 2019 and 3% lower than 2018.

Gold mine production tanked significantly in the fourth quarter of 2021, dropping 1% to 915 tons. It was the lowest level of fourth quarter gold production since 2015. According to the World Gold Council, this was primarily due to operational issues.

Ongoing safety-related stoppages in the Shandong province saw Chinese mine production down 10% y-o-y. Lower grades and operational issues saw production from Burkina Faso 8% lower y-o-y and Australia down 7% y-o-y.”

Overall gold supply was down 1% year on year. An 11% drop in gold recycling more than offset the slight gain in mine output. Last year marked the second successive year of gold supply declines and the first consecutive fall in more than a decade.

Bigger Picture

Looking at the longer trend, gold production has flatlined in recent years, even accounting for the impact of the pandemic.

After slowing for several years, gold mine output fell by 1% in 2019. Although that year marked the first absolute decline in gold production since 2008, it continued a general trend of diminishing mine output.

Historically, mine production has generally increased every year since the 1970s. There was a drop in production in 2008, but that was something of an anomaly, as it occurred at the onset of the 2008 financial crisis. The recent slowdown in mine production is more concerning. In fact, some analysts speculate that we may be at or near “peak gold.” This is the point where the amount of gold mined out of the earth will begin to shrink every year. Several prominent players in the mining industry think we’re close to that point.

In recent years, several gold-mining executives have warned that we have discovered most of the world’s reasonably minable gold. For instance, in 2019, 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. And in the spring of 2019, a report in Deutsche Welle made the case that we’re approaching peak gold.

The pandemic notwithstanding, the biggest problem facing miners is that the easy to mine gold has mostly been dug out of the earth. There has been a sharp decline in the discovery of new gold deposits despite increases in exploration funding. Technology advances could help reach the more difficult to mine gold, but this means increased costs and a higher gold price is necessary to sustain these projects.

Case in point – South Africa was once the world’s leading gold producer. It’s now dropped to number nine globally. In 2018, a study came out saying  South Africa could run out of gold within four decades. Analysts say that at current production levels, the country had only 39 years of accessible gold reserves remaining.

Whether we have reached peak gold or not remains debatable. Regardless, 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.