The gold mining sector faces an uphill battle in sustaining production growth as the quest for new gold deposits becomes increasingly arduous, reports the World Gold Council.
John Reade, Chief Market Analyst at the World Gold Council, underscores the struggle, stating that while first-quarter mine production in 2024 marked a record high with a 4% year-on-year increase, the broader trend reveals a plateau in production since around 2016-2018, with no significant growth observed thereafter.
According to data from the International Trade Association, mine production registered a mere 0.5% uptick in 2023 compared to the preceding year. The growth trajectory has been dwindling over recent years, with a 1.35% increase in 2022 and a more robust 2.7% growth in 2021. However, the sector faced a setback in 2020, witnessing its first decline in a decade with a 1% drop in global gold production.
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Reade elucidates the underlying narrative, highlighting a decade-long period of rapid growth starting from around 2008, juxtaposed with the current struggle to sustain production upsurge.
He elaborates on the daunting task of discovering new gold deposits globally, emphasizing that many potential regions have already been thoroughly explored. Large-scale gold mining necessitates substantial capital and extensive exploration and development efforts, typically spanning a decade or two before a mine becomes operational.
Despite concerted exploration endeavors, the conversion rate of discoveries into viable mining projects remains low, with only approximately 10% of global gold discoveries boasting sufficient reserves to justify extraction.
Cumulatively, around 187,000 tons of gold have been extracted to date, predominantly sourced from regions like China, South Africa, and Australia. However, extractable gold reserves are estimated to stand at approximately 57,000 tons, as per data from the US Geological Survey.
Reade further underscores the hurdles associated with obtaining government permits, citing prolonged processes that significantly delay mining operations. The stringent regulatory landscape adds to the complexities, with securing requisite licenses and permits often spanning several years.
Moreover, mining ventures frequently entail operations in remote locales necessitating substantial infrastructure development, including roads, power, and water facilities. These infrastructural requirements entail additional costs, complicating funding endeavors for mining operations.
Despite recent fluctuations in gold prices following record highs, spurred by robust demand led by China, the challenges in gold production and the broader mining sector indicate the potential for the yellow metal to scale new peaks in the foreseeable future.
