However, the following chart illustrates the severe decline in production, i.e., peak gold, by the six largest gold miners. This particular group of companies has gone steadily downhill from an all-time high of 955 tonnes, or over 40% of world production in 2006, to a multi-decade low of 705 tonnes, or 22.5% of world production in 2017.
So not only are majors declining in the numbers of ounces (-26% over 12 years), they have also lost a significant share of the world gold mining market (-18%):
We have shown that the current narrative promulgated for peak gold applies to the major gold miners only and not for the gold mining industry as a whole. That said, the data presented above cover a relatively short time frame of 19 years: the end of a bear market for gold (2000-2002); a long bull market cycle (2003-2012); a relatively short but deep bear market (2013-2015); and a lower, range-bound gold price over the past three years (2016-2018).
To fully assess the idea of peak gold, I submit we must take a much longer-term view and determine what factors drive mining of the yellow metal.
According to the USGS, world gold production increased from 386 tonnes in 1900 to 3150 tonnes in 2017. That is an eight times increase and an average gain of 1.8% per year:
Mines are wasting assets by definition and the only way to continue to increase production is to spend more money on digging deeper. If that cost can be contained by technological advances then the mine can make a profit, otherwise they are wholly dependent on the price of the commodity rising to justify the expenditure. Therefore, secular bull markets in commodities are defined by a rise in marginal cost of production to a sufficiently high level which encourages new supply into the market.Click HERE to subscribe to Fuller Treacy Money Back to top