Sounds a lot like the talk about Peak Oil several years which never paned out. It takes a couple of years at higher to ramp up production. The price of gold is highly manipulated. The amount recoverable is depended on the price just like oil.
I am not disagreeing that the price of gold going higher but not think this argument should be used.
P.S. And of course, “peak gold” in the strictest sense is nonsense. There’s gold in seawater. We’re not going to run out of the stuff. It’s ultimately a question of economics and technology. What we’re really talking about here is peak mine production based on known deposits, conventional mining methods, and what can economically be brought into production in the foreseeable future.
Yeah, that was my thinking too. But then when you look at the data represented by the charts I used in the essay, it kind of makes sense. The decline in the size and number of major discoveries in particular is pretty striking.
both of you are exactly correct. "peak" gold means the price is not high enough to justify extracting it (from the ground or scrap jewelry or coatings on spacecraft). Every country wants it because confidence in USD fiat is low and falling towards zero. My suspicion is Trump will revalue gold from $42/oz to some really large number, thereby opening up extraction a bit more.
Thanks, Thomas. I’m not convinced he’ll do it before his term is up, but I’m not closed to the possibility either. Now, if it happened, it would NOT, by itself, make marginal gold deposits more economic. But IF a revaluation ultimately translated into a materially higher market price for gold, that would certainly change the economics for a lot of marginal deposits.
I have a number of books in my library, bought in the early 2000s dealing with the topic of peak oil. Since then we’ve had fracking, and there appears to be an abundance of oil today (that’s a separate topic to the war in Iran). It could be that high prices with the advancement of technology, trigger a wave of exploration and reprocessing that results in more Gold being available.
That’s certainly possible, Loic (and I made much the same point in another reply). “Peak gold” in the strictest sense is nonsense. We’re not going to run out of gold, and higher prices and better technology can absolutely make deposits economic that aren’t economic today.
What I’m talking about here is peak mine production based on known deposits, current technology, and what can realistically be brought into production in the foreseeable future. And the part that makes me take the argument seriously is just how few major discoveries are being made, how much smaller they’ve become, and how long it now takes to turn one into a producing mine. I mean, we may eventually figure out how to economically extract gold from seawater. But many of us may be long gone by the time that happens.
Hi Lau I will disagree on this one. Why? The Birmian Greenstone Belt of West Africa that extends into Guyana etc on the other side of the Atlantic. All these areas are just beginning to be explored, west African gold output will soar over the next decade. And forgive me for saying it but Jurisdiction Jurisdiction etc, fortunately these deposits are not in Canada so we will not have to wait 20 years for the hundreds of tons of gold that will appear. These jurisdictions permit promptly because they need the development. Much of the gold also close to surface, huge oxide resources that allow quick and cheap mine development. Consider the cash flow advantage of bringing in the production within 2-3 years from discovery, then consider the cost of the “tier 1” jurisdictional multiple year delay in permitting. With the gold price at $10K+ the advantage of rapid development will not be lost on the majors.
Take a look for example at Desoto Resources (DES.ASX) in Guinea which I regard as a great jurisdiction….why; China has invested billions into Guinea to develop the iron ore and bauxite deposits. The mining cadastre is advanced. Some of those pics on the DES website show how the ground is like cheese with all the holes from the artisanal digging over many years. Côte d’Ivoire another great jurisdiction. Senegal also not far behind. The Birmian parts of Latam I am not so familiar with, time wise it is even less developed than West Africa. Peak gold….not for a while I suggest.
Thanks, Nick. Fair points, and I certainly agree that West Africa has enormous potential and could surprise us a lot in the future.
That said, I think there are a couple of important distinctions here. First, the roughly 18-year discovery-to-production figure I cited is an industry average. Of course some deposits, particularly shallow, straightforward ones in favorable jurisdictions, can come online much faster. But we’re talking about global mine production here, so it’s the broader trend that matters, not the exceptions.
Likewise, underexplored regions like West Africa containing a lot more gold doesn’t necessarily mean enough of that gold will be discovered and brought online quickly enough to prevent a global 'production peak'. That’s possible, but for now it’s a forecast about what might be discovered, whereas the decline in major discoveries and the existing project pipeline are things we can actually observe right now. And I’m sure you know how quickly things can change in Africa and other volatile jurisdictions. And yes, that still applies even to the more stable West African countries.
Finally, on your point about $10,000 gold changing the economics of a lot of deposits... clearly that cuts both ways. If gold is at $10,000, barring a monetary reset or some other extraordinary circumstance, we can assume something pretty extraordinary has happened on the demand side too. So while more supply would eventually follow, it would be coming up against the very different demand environment that got us to $10,000 in the first place.
Thanks, Leif. I think you may mean the Taftan discovery in southeastern Iran. There does appear to be a substantial gold system there, although I haven’t seen reliable numbers yet suggesting it’s large enough to materially change the global supply picture. And even if it turns out to be enormous, a major discovery today can take about two decades to become a producing mine. So many of us may no longer be around by the time it actually produces any gold, if it ultimately does.
Thanks for letting us know that known reserves are shrinking. I didn't realize that was widespread; thought it was just a natural outcome for individual mines, as they dig it up, until they find more reserves.
I don't understand "Every deal that closes takes another buildable project off the market. Which makes the ones still standing that much more valuable."
Why buy a small mining company if not to continue the project and thus increase your dwindling reserves?
Thanks, Al. By “off the market,” I don’t mean the project disappears or doesn’t get developed. I mean it’s no longer available for another major to buy.
Say there are ten good, buildable independent gold projects out there and a major acquires one. That project becomes part of the major’s pipeline, leaving only nine available acquisition targets for everyone else. If the majors increasingly need acquisitions to replace the ounces they’re mining, while the number of good projects available to buy keeps shrinking, the remaining ones become more valuable.
Sounds a lot like the talk about Peak Oil several years which never paned out. It takes a couple of years at higher to ramp up production. The price of gold is highly manipulated. The amount recoverable is depended on the price just like oil.
I am not disagreeing that the price of gold going higher but not think this argument should be used.
Henry
P.S. And of course, “peak gold” in the strictest sense is nonsense. There’s gold in seawater. We’re not going to run out of the stuff. It’s ultimately a question of economics and technology. What we’re really talking about here is peak mine production based on known deposits, conventional mining methods, and what can economically be brought into production in the foreseeable future.
Yeah, that was my thinking too. But then when you look at the data represented by the charts I used in the essay, it kind of makes sense. The decline in the size and number of major discoveries in particular is pretty striking.
both of you are exactly correct. "peak" gold means the price is not high enough to justify extracting it (from the ground or scrap jewelry or coatings on spacecraft). Every country wants it because confidence in USD fiat is low and falling towards zero. My suspicion is Trump will revalue gold from $42/oz to some really large number, thereby opening up extraction a bit more.
Thanks, Thomas. I’m not convinced he’ll do it before his term is up, but I’m not closed to the possibility either. Now, if it happened, it would NOT, by itself, make marginal gold deposits more economic. But IF a revaluation ultimately translated into a materially higher market price for gold, that would certainly change the economics for a lot of marginal deposits.
I have a number of books in my library, bought in the early 2000s dealing with the topic of peak oil. Since then we’ve had fracking, and there appears to be an abundance of oil today (that’s a separate topic to the war in Iran). It could be that high prices with the advancement of technology, trigger a wave of exploration and reprocessing that results in more Gold being available.
That’s certainly possible, Loic (and I made much the same point in another reply). “Peak gold” in the strictest sense is nonsense. We’re not going to run out of gold, and higher prices and better technology can absolutely make deposits economic that aren’t economic today.
What I’m talking about here is peak mine production based on known deposits, current technology, and what can realistically be brought into production in the foreseeable future. And the part that makes me take the argument seriously is just how few major discoveries are being made, how much smaller they’ve become, and how long it now takes to turn one into a producing mine. I mean, we may eventually figure out how to economically extract gold from seawater. But many of us may be long gone by the time that happens.
Hi Lau I will disagree on this one. Why? The Birmian Greenstone Belt of West Africa that extends into Guyana etc on the other side of the Atlantic. All these areas are just beginning to be explored, west African gold output will soar over the next decade. And forgive me for saying it but Jurisdiction Jurisdiction etc, fortunately these deposits are not in Canada so we will not have to wait 20 years for the hundreds of tons of gold that will appear. These jurisdictions permit promptly because they need the development. Much of the gold also close to surface, huge oxide resources that allow quick and cheap mine development. Consider the cash flow advantage of bringing in the production within 2-3 years from discovery, then consider the cost of the “tier 1” jurisdictional multiple year delay in permitting. With the gold price at $10K+ the advantage of rapid development will not be lost on the majors.
Take a look for example at Desoto Resources (DES.ASX) in Guinea which I regard as a great jurisdiction….why; China has invested billions into Guinea to develop the iron ore and bauxite deposits. The mining cadastre is advanced. Some of those pics on the DES website show how the ground is like cheese with all the holes from the artisanal digging over many years. Côte d’Ivoire another great jurisdiction. Senegal also not far behind. The Birmian parts of Latam I am not so familiar with, time wise it is even less developed than West Africa. Peak gold….not for a while I suggest.
Thanks, Nick. Fair points, and I certainly agree that West Africa has enormous potential and could surprise us a lot in the future.
That said, I think there are a couple of important distinctions here. First, the roughly 18-year discovery-to-production figure I cited is an industry average. Of course some deposits, particularly shallow, straightforward ones in favorable jurisdictions, can come online much faster. But we’re talking about global mine production here, so it’s the broader trend that matters, not the exceptions.
Likewise, underexplored regions like West Africa containing a lot more gold doesn’t necessarily mean enough of that gold will be discovered and brought online quickly enough to prevent a global 'production peak'. That’s possible, but for now it’s a forecast about what might be discovered, whereas the decline in major discoveries and the existing project pipeline are things we can actually observe right now. And I’m sure you know how quickly things can change in Africa and other volatile jurisdictions. And yes, that still applies even to the more stable West African countries.
Finally, on your point about $10,000 gold changing the economics of a lot of deposits... clearly that cuts both ways. If gold is at $10,000, barring a monetary reset or some other extraordinary circumstance, we can assume something pretty extraordinary has happened on the demand side too. So while more supply would eventually follow, it would be coming up against the very different demand environment that got us to $10,000 in the first place.
Wasn't there news recently about a potentially huge gold finding in Iran close to Afghanistan?
Thanks, Leif. I think you may mean the Taftan discovery in southeastern Iran. There does appear to be a substantial gold system there, although I haven’t seen reliable numbers yet suggesting it’s large enough to materially change the global supply picture. And even if it turns out to be enormous, a major discovery today can take about two decades to become a producing mine. So many of us may no longer be around by the time it actually produces any gold, if it ultimately does.
Thanks for letting us know that known reserves are shrinking. I didn't realize that was widespread; thought it was just a natural outcome for individual mines, as they dig it up, until they find more reserves.
I don't understand "Every deal that closes takes another buildable project off the market. Which makes the ones still standing that much more valuable."
Why buy a small mining company if not to continue the project and thus increase your dwindling reserves?
Thanks, Al. By “off the market,” I don’t mean the project disappears or doesn’t get developed. I mean it’s no longer available for another major to buy.
Say there are ten good, buildable independent gold projects out there and a major acquires one. That project becomes part of the major’s pipeline, leaving only nine available acquisition targets for everyone else. If the majors increasingly need acquisitions to replace the ounces they’re mining, while the number of good projects available to buy keeps shrinking, the remaining ones become more valuable.
Oh - I see. Thanks.
Let's make our choices, set our lines, and wait for the bigger fish to strike. Thanks. Jay