Gold Mining 'Peaks, Will Plateau in 2015' on Low Margins, Spending
Thursday, 2/12/2015 10:30
Gold miners in "precarious position", 2-in-3 still value reserves above $1250...
GOLD MINING output worldwide grew to a new record in 2014, a report from the industry's World Gold Council says today.
But annual gold mining output will now "plateau" it believes, as low profit margins and lower spending continue to curb exploration and development.
Global gold mining output grew to 3,114 tonnes in 2014, says the World Gold Council – quoting data compiled by leading consultancy Thomson Reuters GFMS – rising for the sixth year running and hitting a new record high some 2% above 2013.
Output in China – now the No.1 gold mining nation since 2007 – rose sharply, up 6% to new record levels. But large falls came in "established" producer countries according to GFMS data, with US output down 12% on 2013, Peru and Chile dropping 10% each, and former world No.1 South Africa losing another 7% of its annual gold output.
"Mines that have been developed and become operational in recent years added to the supply stream," says the World Gold Council in its latest
Gold Demand Trends report Thursday.
But "looking forward, the growth in supply from such projects continues to diminish and is likely to cap out in 2015 as the supply pipeline thins."
Gold miner spending on new exploration has fallen sharply as prices dropped 40% from the 2011 peak. Producer companies have also been "wrestling with cost pressures," says the market-development organization, with tighter spending now leading to a "dearth of new projects."
Production costs have also retreated. But as recently as November 2014, a recent report from management consultancy PwC says, more than 2-in-3 gold mining firms worldwide
still valued their below-ground reserves at more than gold's current price of $1250 per ounce.
"We would argue that in terms of both profitability and volumes, the industry remains in a precarious position," said the GFMS report last month.
"We remain of the view that mine production will plateau in the next couple of years," says the World Gold Council's research team, led by director for investment strategy Marcus Grubb.
Gold's price drop has "prompted a severe cut back in the development of new mining projects," says the Council, whose 20 members include the world's largest producer companies.
"So although production will remain at – or close to – this record level for next year, the potential for existing operations to generate greater volumes of output is limited."
"Closures and suspensions," said Thomson Reuters GFMS in its own
Gold Survey 2014 update last month, "have so far been limited to smaller, ageing higher-cost operations."
But the consultancy also notes "deferrals" of both new exploration and development of recent discoveries.
2014's changing gold output from individual mines reflected the broader world picture, GFMS goes on, with "more mature properties generally" performing worse.
Output losses were recorded at "some of the world's largest mature assets," it goes on, citing the Cortez site in Nevada operated by world No.1 miner Barrick (NYSE:ABX), the neighboring complex owned by No.2 Newmont (NYSE:NEM), the giant Yanacocha project jointly operated by Newmont and Buenaventura (SWX:BVN) in northern Peru, plus some of the biggest sites in South Africa.
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