The World Gold Council has reported that the gold mining industry is facing challenges in sustaining production growth due to the difficulty in finding new deposits of the precious metal. While there has been a record first quarter mine production in 2024, with a 4% increase compared to the previous year, the overall trend shows a plateau in production since 2016-2018, according to John Reade, the WGC Chief Market Strategist.
Slow Growth in Mine Production
Data from the international trade association reveals that mine production only grew by 0.5% in 2023 compared to the previous year. In 2022, the year-on-year growth was 1.35%, and in 2020, global gold production experienced a decline of 1%. Reade emphasizes that after a period of rapid growth from around 2008, the mining industry is now struggling to achieve sustained production growth.
Declining Availability of New Deposits
Reade explains that the challenge lies in the decreasing availability of new gold deposits worldwide. Many prospective areas have already been explored, making it harder to find untapped sources of the precious metal. Large-scale gold mining is a capital-intensive process that requires extensive exploration and development. It typically takes an average of 10 to 20 years before a mine is ready for production, according to the WGC.
Low Likelihood of Discovery Progressing to Mining
Even during the exploration process, the likelihood of a discovery progressing to the development of a mine is low. Only about 10% of global gold discoveries contain enough metal to justify mining. To date, approximately 187,000 metric tons of gold have been mined, with China, South Africa, and Australia being the major contributors. The estimated gold reserves that can be excavated are around 57,000 tonnes, as reported by the United States Geological Survey.
Challenges in Permitting and Infrastructure
Aside from the difficulty in finding new deposits, the gold mining industry also faces challenges in obtaining government permits and licenses. These permits are becoming harder to secure and take longer to process, further complicating mining operations. Additionally, many mining projects are planned for remote areas that lack necessary infrastructure such as roads, power, and water. Building the required infrastructure and financing operations in such locations adds to the overall costs and challenges faced by mining companies.
Gold Prices and Demand
After reaching record highs in recent months, gold prices are currently experiencing a period of stabilization. Strong demand, particularly from China, has contributed to the rally in gold prices. As of the current trading period, spot gold is priced at $2,294.3 per ounce.