The gold mining industry is grappling with maintaining production growth as new deposits become increasingly scarce, according to the World Gold Council (WGC).
Plateau in Production Growth
“We’ve seen record first quarter mine production in 2024, up 4% year on year. But the bigger picture, I think about mine production is that, effectively, it plateaued around 2016, 2018 and we’ve seen no growth since then,” said John Reade, WGC Chief Market Strategist.
Data from the WGC indicates that mine production edged up only 0.5% in 2023 compared to the previous year. This is a continuation of a trend where growth rates have been modest: 1.35% in 2022, 2.7% in 2021, and a decline of 1% in 2020—the first drop in a decade.
“I think the overwhelming story there is: after 10 years of rapid growth from around 2008, the mining industry is struggling to report sustained growth in production,” Reade elaborated.
Declining Discovery Rates
Reade pointed out that new gold deposits are becoming harder to find globally as many promising areas have already been explored. The WGC’s data shows that after a decade of rapid growth starting around 2008, the gold mining industry now struggles to sustain production growth.
“Large-scale gold mining is capital-intensive, and requires significant exploration and development, taking an average of 10 to 20 years before a mine is ready for production,” Reade explained.
“Even during the exploration process, the likelihood of a discovery progressing into the development of a mine is low, with only about 10% of global gold discoveries containing sufficient metal to warrant mining.”
Challenges in Infrastructure and Permitting
Compounding the issue of dwindling discoveries are the challenges related to securing government permits, which have become harder to obtain and take longer to process. “Securing licenses and permits needed before mining companies can start operations can take several years,” Reade noted.
Additionally, many new mining projects are located in remote areas that require significant infrastructure development, including roads, power, and water. These added costs make it more difficult and expensive to build and finance new mining operations.
“It’s getting harder to find gold, permit it, finance it, and operate it,” Reade said.
Global Gold Reserves
To date, around 187,000 metric tons of gold have been mined, with the majority coming from countries like China, South Africa, and Australia. The United States Geological Survey estimates that about 57,000 metric tons of gold reserves remain available for excavation.
Market Impact
Despite these challenges, gold prices have seen a rally to record highs in recent months, bolstered by strong demand led by China. Currently, spot gold is trading at over $2,000 per ounce.
However, the future of gold mining production remains uncertain as the industry continues to face significant hurdles in discovery, permitting, financing, and operations.
In summary, the gold mining industry is at a crossroads. While demand and prices remain high, the ability to sustain and grow production is increasingly difficult due to the challenges in finding new deposits, securing permits, and developing necessary infrastructure.
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Dean is a freelance content writer who contributes to various Digital Media Companies and independent websites all over the world. He has over 20 years of financial industry experience, so it’s safe to say he’s well informed.
