Gold mine discoveries down 85% in ten years

Gold miners are having to make an increasing effort to tap into new gold reserves, according to figures released by theBloomberg  Despite the fact that the sector is investing much more money in exploration , less gold is being found almost every year. If you compare the discoveries of gold veins in 2015 with those of 2006, there is even a decrease of 85%.

It is therefore becoming increasingly difficult to find new gold reserves, which are so important to maintain production in the longer term. Even before existing gold resources are exhausted, the mines have to search for new reserves, because it takes several years to get a new gold mine operational.

Fewer and fewer new discoveries in gold mining sector (Source: Bloomberg)

Fewer reserves

Not only is the gold mining sector struggling to find enough new gold reserves, they have also had to cut back on the operation of existing mines due to the lower gold price. Since 2012, the mining sector's investment has fallen by 41%, which means that they have not made enough investments to extract all the reserves from the gold mine. Due to the low gold price , mines have mainly dug up the high quality gold ore.

In doing so, they reduced the cost per troy ounce, but the downside of this approach is that it reduces the total yield of the gold mine. The gold ore that is left behind is not interesting enough to extract, so the economically recoverable gold supply decreases. The sector's total identified gold reserves have fallen by 40% since 2011 to its lowest level in a decade.

Mines cut down on production costs (Source: Bloomberg)

Reserves are not replenished with new gold discoveries (Source: Bloomberg)

Peak Gold

The production of the gold mining sector is still on an upward trend, but when we compare these figures, it is hard to imagine that this trend will continue for long. According to BMO Capital Markets, gold mining production will peak in 2019 and then decline rapidly. Mark Bristow, director of mining company Randgold, also expects a so-called 'Peak Gold' in the coming years.

A decline in gold mine production can have a major impact on the price of gold. Less new supply means that there will be more bidding on existing gold stocks. This could put upward pressure on prices.

Peak Gold in 2019? (Source: Bloomberg)