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Peak Gold: The depleting world of Yellow Metal

2009-02-02

MUMBAI: You have heard of Peak Oil, as the world is increasingly debating the maximum rate of oil production because oil reserves are depleting in comparison to the rising demand for energy. But have you heard of Peak Gold?

Similar to Peak Oil, we have these days a Peak Gold phenomenon whereby demand for gold is increasing; but the production of the yellow metal is coming down and biggest gold discoveries have already been done.

“While world's mines are depleting their reserves, particularly their high grade ore, the remaining supplies of gold are becoming harder to find,” says reputed gold analyst Jon Herring. Demand for gold reached 1,133 tonnes in 2008, an 18% increase from the previous year. In dollar terms, this represented a 51% increase to an all-time record $31.8 billion.

Gold prices are zooming these days. It rose to $926 per ounce last week, prompting analysts to predict that gold prices will easily touch $1000 in a month or two thanks to the global economic meltdown and the free-fall of currencies across several nations led by the US dollar.

While the price of gold has gone up every year since 2001, global production of gold has been falling in comparison to the demand. For instance, gold production in South Africa, the largest producer of gold, has peaked in the 1970s. Brazilian gold production peaked in 1982, Canadian in 1991, Australian peaked in 1997 and US in 1998. All these countries together produce around 40% of the global gold.

New discoveries of gold are becoming smaller and companies are struggling to maintain existing gold reserves thanks to high cost of production. In spite of an estimated $18 billion in exploration expenditure over the past five years, the quality and number of new gold deposits dropped, says a research analysis from the Metals Economic Group.

Interestingly, probably, you have not have heard of any new gold reserves discoveries in the recent past. The Metals Economic Group says there has only been four world class gold discoveries in the last 15 years. Also, in the last 15 years, top five gold producing companies in the world have each produced between 3.5 and 7 million ounces per year.

Thus, while demand for gold has been increasing day by day along its price, production or supply of gold has been falling.

So where are the new supplies of gold going to come from? Herring says mining is a depleting business and if a company does not replace the reserves it sells each year, that company will someday cease to exist. “The major producers are voraciously hungry for new gold reserves. But they can't go out and find them by themselves. The best exploration geologists no longer work for the big companies. They work for and own the smaller, more nimble outfits - the junior resource companies. In fact, of all new discoveries, 75 percent are made by the juniors,” points out Herring.

According to Herring, in 2008, the gold exploration industry was decimated due to the worldwide bear market. “They are selling at a greater discount to gold than they were even when the gold bull market began, when gold was roughly $600 cheaper than it is today. In fact, many of these companies are trading well below their cash value. The bull market in gold is fully intact and only shows signs of heating up in the years ahead. The demand for the metal is at record levels and growing. Production has been falling steadily for nearly a decade. And the major mining companies are starved for new reserves and they do not currently have the resources to discover them on their own,” adds Herring.

polkiloba a écrit :la corrélation entre le cours de l'or et du pétrole est généralement bonne. Du moins c'est vrai la plupart du temps, tant à la hausse (période 1,2,3), qu'a la baisse (période R) mais ce n'est pas toujours le cas (période A,B).

sacado a écrit : Tiens à propos vincent, j'ai remarqué que les lingots vendus par CPR OR ont une prime négative depuis quelques temps

le 28 sept 2007 energy_isere a écrit : Dans l' annual report 2005 de l' USGS on trouve : http://minerals.usgs.gov/minerals/pubs/ ... _mcs05.pdf
2003 : 2590 t
2004 : 2470 t
et dans l' annual report 2007 de l' USGS on trouve : http://minerals.usgs.gov/minerals/pubs/ ... _mcs07.pdf
2005 : 2470 t
2006 : 2500 t

La production d' Or dans son plateau ondulé ?

Peak Oil and Peak Gold

South Africa peaked in the 1970s at 1000 tonnes (yet is still the main producer). The USA peaked in 1998 at 366 tonnes while Australia peaked in 1997 at 314 tonnes. Canada peaked in 1991 at 177 tonnes and Brazil in 1982 at 200 tonnes and so on. These example regions when combined currently produce 40% of the world's gold. If this 40% declines at 5% per annum then the other 60% has to increase production by 3% just to keep production flat.

Just like oil, the relatively few "giants" of gold production are being replaced by a host of smaller "minnows". Just like oil, gold explorers are finding less gold in lower grades of quality. In terms of oil, the gold Ghawars and Cantarells have long been discovered and exploited. It is now basically a mopping up operation at the edges of exploration.

sacado a écrit :

energy_isere a écrit : Il y a plus de doute, le peak de production d' Or à bien été atteint en 2001 (avec 2600 tonnes produites).

Vu que l'or est un métal stocké et non consommé, la production annuelle ne faisait que très peu varier le stock mondial. Donc je ne pense pas que ça change grand chose au niveau du prix de l'or, contrairement aux pics des autres matières premières ?

Et puis, si l'on arrête d'en extraire faute de rentabilité, ça ne peut qu'être une bonne nouvelle pour l'environnement...

sacado a écrit :Le napoléon a une prime négative par rapport au fixing de Londres.