For a second year in a row, we have worked with Roy Sebag of Natural Resource Holdings to produce an in-depth report of all gold deposits hold be public, private, and government backed companies.
We were able to identify a total of 580 deposits that have over 1,000,000 ounces of gold for a total of 3.72 billion in-situ ounces. The average grade of all deposits is 1.01 g/t Au.
These deposits are owned by 312 entities including public, private, and government sponsored corporations. 261 of the deposits were owned (or partially owned) by independent junior miners.
2013 vs Previous Years
It is our belief that this is by far the most comprehensive report yet. That said, those that compare this report to 2012 will notice significant differences in the final metrics. Most notably:
- Total deposits over 1 million oz increased from 439 to 580 worldwide.
- Total ounces have increased from 3.02 billion oz to 3.72 billion oz of Au.
- Average grade has increased from 0.82 g/t to 1.01 g/t Au.
The chief difference is that this year we decided to include all African deposits and mines, including projects that we believe will never be mined because they did not meet our thresholds of grade or depth. However, by including these projects, which add up to about 350 million oz alone, we believe the report is much more encompassing.
Trends in Size and Grade
The project economics of gold deposits are mostly dependent on two major factors: size and grade. Without a sizeable ore body, a mining operation cannot acquire the economies of scale to bring down the cost of production. Likewise, a project without grade may not have the margins for each ton of ore processed to justify production.
The average grade differed significantly between producing and undeveloped deposits. The average grade of all producing mines is 1.18 g/t Au, which is 32.6% higher than the average of all projects still in the development phase (0.89 g/t Au). This has significant implications on future gold production. In the near term, with significant volatility and the gold price at a three-year low, many of these projects are simply not economically feasible. In the medium to long term, unless major discoveries are made, either gold production must decrease (with a focus on only higher grade deposits) or the price of gold must rise to make these projects economical.
A key take home point of this report each year is the rarity of large, high-grade projects. There are only 51 (8.8%) projects in the world that are more than 5 million oz and have an average grade of higher than 3 g/t Au. Of these, there are only 21 that are not yet in production.
While North America shows the largest amount of contained gold, Africa continues to be home to some of the highest grade (and highest risk) projects on the planet.
The highest grade deposits in the world are in countries such as South Africa, Tanzania, DRC, Mali, Russia, Ghana, Ivory Coast, Ecuador, Kyrgyzstan, and Papua New Guinea.
The Future of Gold Supply
Our figure for in-situ ounces that we have provided (3.72 billion oz Au) is a comprehensive view of what is below ground in terms of reserves and resources.
However, to come up with a clear picture of what is actually recoverable, the reality is that there are several limitations to the amount of gold that will actually become part of the future supply chain:
- Economic pit outlines have not yet been applied.
- Metallurgical recovery rates have not yet been applied.
- Inferred resources have been included in global contained ounces.
- Undeveloped deposits with no clear path towards permitting remain included.
To project an accurate figure, we need to take our 3.72 billion oz number and apply some math:
Total in-situ ounces in database:
70% of total become mines:
70% metallurgical recovery rate:
This number, 1.82 billion oz, becomes really interesting when we look at annual extractable supply. Averaged over 50 years, the supply is equal to 1,134 tonnes (36,464,480 oz) of gold per year.
This figure is equal to only 42.0% of the 2,700 tonnes (86,807,016 oz) of worldwide gold production in 2012.
Led by countries such as Russia and China, central banks have recently become net buyers of gold. Meanwhile, ETF gold outflows have been a temporary source of supply this year, but obviously this cannot persist. It’s also unreasonable to assume that recycling will make up a significantly greater piece of supply without the price of gold increasing substantially.
With the grade of current producing gold mines being 32.6% higher than undeveloped deposits, it makes the supply scenario even more clear. Not only is the current yearly mine supply difficult to sustain, but future mines coming online will be challenged by grade and margins to be economical at today’s prices.
Mathematically, unless we have high-grade, high ounce deposits that are being fast tracked online, it will be very difficult to find a way to get supply to match demand.
The Silver Series: The Start of A New Gold-Silver Cycle (Part 1 of 3)
As the decade-long bull run shows signs of slowing, is it time for precious metals to shine? Here’s why it could be the start of a new gold-silver cycle.
The world has experienced a decade of growth fueled by record-low interest rates, a burgeoning money supply, and historic debt levels – but the good times only last so long.
As the global economy slows and eventually begins to retract, can precious metals offer a useful store of value to investors?
Part 1: The Start of a New Cycle
Today’s infographic comes to us from Endeavour Silver, and it outlines some key indicators that precede a coming gold-silver cycle in which exposure to hard assets may help to protect wealth.
Bankers Blowing Bubbles
Since 2008, central bankers around the world launched a historic market intervention by printing money and bailing out major banks. With cheap and abundant money, this strategy worked so well that it created a bull market in every sector — except for precious metals.
Stock markets, consumer lending, and property values surged. Meanwhile, the U.S. Federal Reserve’s assets ballooned, and so did corporate, government, and household debt. By 2018, total debt reached almost $250 trillion worldwide.
Currency vs. Precious Metals
The world awash in unprecedented amounts of currency, and these dollars chase a limited supply of goods. Historically speaking, it’s only a matter of time before the price of goods increases or inflates – eroding the purchasing power of every dollar.
Gold and silver are some of the only assets unaffected by inflation, retaining their value.
Gold and silver are money… everything else is credit.
– J.P. Morgan
The Perfect Story for a Gold-Silver Cycle?
Investors can use several indicators to gauge the beginning of the gold-silver cycle:
- Gold/Silver Futures
Most traders do not trade physical gold and silver, but paper contracts with the promise to buy at a future price. Every week, U.S. commodity exchanges publish the Commitment of Traders “COT” report. This report summarizes the positions (long/short) of traders for a particular commodity.
Typically, speculators are long and commercial traders are short the price of gold and silver. However, when speculators and commercial traders positions reach near zero, there is usually a big upswing in the price of silver.
- Gold-to-Silver Ratio Compression
As the difference between gold and silver prices decreases (i.e. the compression of the ratio), history suggests silver prices can make big moves upwards in price. The gold-to-silver ratio compression is now at high levels and may eventually revert to its long-term average, which implies a strong movement in prices is imminent for silver.
- Scarcity: Declining Silver Production
Silver production has been declining despite its growing importance as a safe haven hedge, as well as its use in industrial applications and renewable technologies.
- The Silver Exception
Silver is not just for coins, bars, jewelry and the family silverware. It stands out from gold with its practical industrial uses which account for 56.1% of its annual consumption. Silver will continue to be a critical material in solar technology. While photovoltaics currently account for 8% of annual silver consumption, this is set to change with the dramatic increase in the use of solar technologies.
The Price of Gold and Silver
Forecasting the exact price of gold and silver is not a science, but there are clear signs that point to the direction their prices will head. The prices of gold and silver do not accurately reflect a world awash with cheap and easy money, but now may be their time to shine.
Don’t miss another part of the Silver Series by connecting with Visual Capitalist.
Why Gold is Money: A Periodic Perspective
Gold has been used as money for millennia. People often attribute this to beauty, but there are basic physical properties for why gold is money.
Why Gold is Money
The economist John Maynard Keynes famously called gold a “barbarous relic”, suggesting that its usefulness as money is an artifact of the past. In an era filled with cashless transactions and hundreds of cryptocurrencies, this statement seems truer today than in Keynes’ time.
However, gold also possesses elemental properties that has made it an ideal metal for money throughout history.
Sanat Kumar, a chemical engineer from Columbia University, broke down the periodic table to show why gold has been used as a monetary metal for thousands of years.
The Periodic Table
The periodic table organizes 118 elements in rows by increasing atomic number (periods) and columns (groups) with similar electron configurations.
Just as in today’s animation, let’s apply the process of elimination to the periodic table to see why gold is money:
- Gases and Liquids
Noble gases (such as argon and helium), as well as elements such as hydrogen, nitrogen, oxygen, fluorine and chlorine are gaseous at room temperature and standard pressure. Meanwhile, mercury and bromine are liquids. As a form of money, these are implausible and impractical.
- Lanthanides and Actinides
Next, lanthanides and actinides are both generally elements that can decay and become radioactive. If you were to carry these around in your pocket they could irradiate or poison you.
- Alkali and Alkaline-Earth Metals
Alkali and alkaline earth metals are located on the left-hand side of the periodic table, and are highly reactive at standard pressure and room temperature. Some can even burst into flames.
- Transition, Post Transition Metals, and Metalloids
There are about 30 elements that are solid, nonflammable, and nontoxic. For an element to be used as money it needs to be rare, but not too rare. Nickel and copper, for example, are found throughout the Earth’s crust in relative abundance.
- Super Rare and Synthetic Elements
Osmium only exists in the Earth’s crust from meteorites. Meanwhile, synthetic elements such as rutherfordium and nihonium must be created in a laboratory.
Once the above elements are eliminated, there are only five precious metals left: platinum, palladium, rhodium, silver and gold. People have used silver as money, but it tarnishes over time. Rhodium and palladium are more recent discoveries, with limited historical uses.
Platinum and gold are the remaining elements. Platinum’s extremely high melting point would require a furnace of the Gods to melt back in ancient times, making it impractical. This leaves us with gold. It melts at a lower temperature and is malleable, making it easy to work with.
Gold as Money
Gold does not dissipate into the atmosphere, it does not burst into flames, and it does not poison or irradiate the holder. It is rare enough to make it difficult to overproduce and malleable to mint into coins, bars, and bricks. Civilizations have consistently used gold as a material of value.
Perhaps modern societies would be well-served by looking at the properties of gold, to see why it has served as money for millennia, especially when someone’s wealth could disappear in a click.
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