It’s Becoming More Challenging to Mine Gold

The mining sector is facing challenges in maintaining production growth, as locating new deposits of gold has become increasingly difficult, according to the World Gold Council.

John Reade, the Chief Market Analyst at the World Gold Council, noted that while there was record mine production growth of 4% in the first quarter of 2024 compared to a year earlier, the broader trend indicates that mine production plateaued around 2016 and 2018, with no significant growth since then.

Data from the International Trade Association reveals that mine production rose by only 0.5% in 2023 versus the prior year. In 2022, year-on-year growth was 1.35%, and the year before that it stood at 2.7%. Notably, in 2020, global gold production experienced its first decline in a decade, dropping by 1%.

Reade emphasized that the mining industry has struggled to achieve sustained production growth since experiencing rapid growth starting around 2008. He pointed out that the search for new gold deposits has become more difficult globally, as many promising areas have already been thoroughly explored.

The World Gold Council highlighted that large-scale gold mining necessitates substantial investment and prolonged exploration and development, typically taking 10 to 20 years before a mine begins production. During the exploration phase, the chances of converting a discovery into an operational mine are low, with only about 10% of global gold discoveries having enough viable metal to warrant mining.

To date, around 187,000 tons of gold have been extracted globally, primarily from China, South Africa, and Australia. The estimated recoverable gold reserves are about 57,000 tons, according to the US Geological Survey.

Reade further pointed out that acquiring government permits for mining has become a more lengthy and challenging process. Obtaining necessary licenses can take several years before mining operations can commence. Additionally, many planned mining projects are located in remote areas, which require significant infrastructure investments, such as roads, power, and water supplies, increasing the overall costs associated with these ventures.

Despite recent declines in gold prices following record highs driven by strong demand from China, the ongoing difficulties in gold production and the mining sector suggest the potential for the yellow metal to reach new record levels in the future.