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Global Gold Mines and Deposits Ranking 2012

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Gold Mine Deposit Rankings 2012
Thanks to Roy Sebag and Natural Resource Holdings for having us involved in this project. Roy’s team did some excellent research to see how truly rare a 1 million oz+ gold deposit is and our job was to capture the data using visualizations. See the full 30 page report here.

Introduction

Following on the success of last year’s report we have decided to make the ranking of the world’s gold deposits an annual endeavor highlighting trends in future mine supply, depletion, discoveries, and in-situ grades.

As far as we know, there has not been a similar effort to compile a comprehensive database of the world’s gold mines and deposits. Nevertheless, we rose to the laborious challenge as we knew that the industry reliance on risk capital via public markets presented an opportunity to data mine regulatory filings which would result in a high quality database.

With this research our goal was to provide quantitative answers to some of the questions we kept asking ourselves as investors in the space. Questions such as:

How many ounces of in-situ gold exist?

How many gold mines exist in Canada?

How rare is a 1.0 million ounce undeveloped deposit?

The report answers these questions and more while providing insight into the scarcity of mines & deposits. Additionally, having a granular view of the supply mix is useful as it allows market participants to ascertain the long-term supply and demand fundamentals of the metal.

We have made some important changes this year to the methodology of the database adding grade, tonnage, and government owned mines/deposits. We also partnered with Visual Capitalists, an investor website that provides rich visual content, to assist in visualizing the data we compiled. The report is free for usage and distribution with acknowledgment of the author.

Sincerely,

Roy Sebag

Changes to Methodology

This year we implemented some important changes to our methodology leading to a higher quality database that is more comprehensive:

A)      Introduction of Grade and Tonnage in grams per tonne providing a more qualitative analysis of each respective deposit.

B)       The inclusion of Government owned deposits such as Murantao and Sukhoi Log.

C)       The inclusion of South African mines and deposits.

D)      The inclusion of Australian listed companies as well as Polyus, Anglogold Ashanti and Newcrest, companies that are harder to compile due to the opacity of their mineral resource disclosure.

While we still have serious reservations relating to what portion of delineated resources can actually be extracted in the South African deposits we felt that they warranted inclusion in order to provide readers with an all-encompassing database. That same logic led us to include government owned mines even though we are somewhat skeptical of their reported grades and often relied on an outdated technical report.

Methodology

We started with a list of 1,892 publicly traded companies that are in some way involved in gold production, exploration, or development of over 7,000 geologic anomalies. Our goal was to find an undeveloped gold deposit or producing mine that hosted over 1 million troy ounces of in-situ resources under a globally respected mineral definition standard such as CIM NI 43-101, JORC, or SAMREC.

In an effort to provide the most comprehensive database and due to the fact that every proven or probable ounce starts of as inferred, we aggregate all resource categories into one figure (refer to last year’s report for a discussion relating to aggregating all resource categories). Where there are reserves and resources we will most likely use the inclusive resource figure. When a cutoff grade is recommended by a geological consultancy we will rely on that cutoff grade unless the report was outdated and we felt a lower cutoff grade was warranted. It is important to stress that resources are not necessarily indicative of future mine supply given that metallurgical recovery rates and economic pit outlines are not applied. In the “Potential Mine Supply Exercise” section we discuss this further.

When it came to copper/gold porphyries it was difficult to draw the line as to what was a gold deposit vs. a copper deposit. In this year’s report we included deposits such as Reko Diq and Galore Creek because we felt their global contained ounces were too large to disregard even though they are primarily copper deposits.

2012 Result Summary

From an initial list of 1,896 companies we were able to identify 212 entities (Public, Private and Government Sponsored Corporations) that own 439 gold deposits hosting over 1,000,000 ounces in all categories representing a total of 3,015,542,164 ounces of gold.  The complete list can be found at the end of this report.

Summary of Findings:

Total Mines & Deposits in over 1 million ounces in-situ: 439

Total In-Situ Ounces: 3,015,542,164      Total Tonnage & Grade of Database: 113.9 Billion Tonnes @ .82 g/t

Total In-Situ Ounces & Avg. Grade Producing Mines: 1,556,265,676 oz.  @ 1.06 g/t

Total In-Situ Ounces & Avg. Grade Undeveloped Deposits: 1,459,276,488 oz. @ .66 g/t

Global In-SITU Ranking

Mines & Deposits over 3 million Oz: 228                                        Mines & Deposits over 5 million Oz: 148

Mines & Deposits over 10 million Oz: 74                                        Mines & Deposits over 20 million Oz: 33

Producing Mines over 3 Million Oz: 120                                         Undeveloped Deposits over 3 Million Oz: 108

Producing Mines over 5 million Oz: 82                                            Undeveloped Deposits over 5 million Oz: 66

Producing  Mines over 10 million Oz: 43                                         Undeveloped Deposits over 10 million Oz: 31

 

HIGH GRADE GOLD SUMMARY

Mines & Deposits over 1mm oz and 3 g/t: 136                              Mines & Deposits over 1mm oz and 5 g/t:  81

Mines & Deposits over 1mm oz and 10 g/t: 26                              Mines & Deposits over 1mm oz and 15 g/t: 11

Producing Mines over 1mm oz and 3 g/t:       76                           Undeveloped Deposits  over 1mm oz and 3 g/t: 60

Producing Mines over 1mm oz and 5 g/t:       49                           Undeveloped Deposits  over 1mm oz and 5 g/t: 32

Producing Mines over 1mm oz and 10 g/t: 14                            Undeveloped Deposits  over 1mm oz and 10 g/t: 12

For full results and tables of deposits, view the full report PDF. 


2012 Results Discussion

This year’s results confirmed both the scarcity of gold deposits as well as the lower-grade production trends facing the industry. Even with our generous thresholds allowing inferred resources to be included in the database, we were able to identify only 439 mines or deposits containing over 1 million ounces of gold.

In our view a mine or deposit is an asset no different than a farm, commercial property, or financial security. Yet when it comes to gold, there are only 439 assets that meet the industry perceived economic threshold of 1 million ounces.  Last year, we compared this figure to the tens of thousands of commercial real estate properties in the world or the nearly 72,000 financial securities. While the crustal abundance of gold is fixed, and discovery grades continue to decline, there is no limit to the creation of financial securities and plenty of land and building materials to construct more property. Simply put, a gold mine or deposit with over 1 million ounces is a very rare asset. This is especially true when viewing the geographical distribution of the mines & deposits:

Independently Owned Undeveloped Deposits

Another data point we found fascinating was that out of 439 mines or deposits, 189 are in fact producing mines owned by companies with an average market capitalization of $1.8 Billion. This leaves us with a universe of undeveloped deposits over 1 million ounces of just 250. Of course some of these 250 deposits are owned by miners (84) while just 166 are owned by independent junior companies, private companies, or government sponsored enterprises. Investors seeking leverage to gold should focus on these companies as they provide the best exposure to a rising gold price environment.  We have attached a table with these deposits and companies at the end of the report titled “Undeveloped Deposits over 1mm oz owned by Independent Juniors”.

It is interesting to note that in Canada we were able to find only 59 undeveloped deposits over 1mm ounces owned by 49 companies (41 Independents). In the United States we found only 33 deposits owned by 26 companies (23 Independents).

Internally, the purpose of this report was to identify potential short-comings in the theories employed by leading thinkers in the gold industry. After reviewing nearly 2,000 companies in the space we can objectively say that are no such red flags. Annual discoveries in 2011 lacked the gravitas required to move the needle on the aggregate in-situ figures after incorporating depletion. This was surprising to as historically high gold prices have provided nearly unprecedented capital to gold exploration companies and we had assumed that after tallying up the year’s discoveries there would be a significant nominal gain in ounces.  Another important data point was observed with regards to the grade of producing mines vs. undeveloped deposits with grades for undeveloped deposits being markedly lower (37%) guaranteeing the need for higher energy input in the future only to sustain current production figures.

Another caveat with the undeveloped deposits in the database is that some of the largest ones face significant permitting headwinds. Pebble, Reko Diq, Donlin, KSM, and Rosia Montana which represent nearly 20% of the undeveloped  ounces in the database may not become mines for 10,20 and even 30 years.

Quality Deposits are Rare

While this report and the accompanying database provide an accurate view of global mine supply, there are crucial qualitative metrics still missing. Even high grade deposits with no infrastructure are inferior to easily mined bulk tonnage deposits with close proximity to infrastructure in stable geopolitical jurisdictions.

Looking at the matrix of undeveloped deposits, one can see why size and even grade are not the most important attributes when predicting which deposit will become a mine. Let us compare Cerro Cassale in Chile with 32.5mm ounces to Titiribi in Colombia with 11.1mm ounces (and continues to grow). While Cerro Cassale is nearly three times the size, its remote location in the Maricunga desert has forced Barrick to budget over $500mm for a120km water pipeline. Titiribi, owned by independent junior Sunward Resources, is located on a paved road with both water and power running directly to the site. While it is too early to estimate CAPEX for Titiribi, it is not farfetched to assume that for the amount Barrick will be spending transporting water from point A to point B, Titiribi will be producing a few hundred thousand ounces of gold per annum.

In conclusion, we would like to stress that while this database serves as an effective starting point we urge investors to incorporate additional metrics such as geopolitical risk, permitting challenges, and most importantly infrastructure when ranking deposits for investment.

Global Mine Supply Exercise

In this section we will attempt to make sense of the 3,015,542,164 ounce (93,796 tonnes) figure which is the sum of all in-situ ounces in the database. As we previously explained this figure is inaccurate as it relates to potentially mined ounces in the future due to the following factors:

1)       Inclusion of inferred resources in global contained ounces.

2)       Not applying any economic pit outlines.

3)       Not applying any metallurgical recovery rates.

4)       The inclusion of undeveloped deposits with no clear path towards permitting.

In order to project an accurate figure we will adjust the 3,015,542,164 ounce number through an exercise that incorporates metallurgical recovery rates, economic pit outlines, and physical constraints that come with moving the billions of tonnes that host these ounces.

First, we will apply a metallurgical recovery rate. Industry averages tend to be 70-90% depending on the type of mineralization. Casting a wide net, we will use 80% as our metallurgical recovery rate. Following this step we are left with 2,412,433,133 ounces.

Next, we will apply economic pit outlines to the resource figure. Once again in an effort to include the most possible ounces we will apply only a 10% reduction for potential pit outlines. Given the amount of inferred ounces in our database this is a very generous figure. Following this step we are left with 2,171,190,358 ounces or 67,533 tonnes.

Next, we will estimate the physical constraints required to mine the remaining ounces. As these ounces exist within 81 billion tonnes of ore (49 billion tonnes for undeveloped deposits containing 1.05 billion ounces after applying economic pit outlines and metallurgical recoveries) they cannot be immediately extracted from the earth’s crust.

As we are estimating future potential supply, the 189 producing mines are less important given their production is already factored in the existing supply mix. A more relevant exercise is one projecting future supply from undeveloped deposits as only they could meaningfully disrupt the supply & demand fundamentals.

Let us assume for a moment that all 250 undeveloped deposits were somehow permitted and financed tomorrow.  With 49 billion tonnes to mine at an average grade of .66 g/t it would take no less than 25 years to extract the 1,050,000,000 ounces contained within these deposits. Arriving at this figure, we assume that the average build time would be 3 years and the average mill size would be 25,000 tonnes per day.

Even with our unrealistic scenario introducing all 250 undeveloped deposits into the supply mix at once, we can only quantify an increase of roughly 42mm ounces of gold production or 1,306 tonnes per annum. Compare that to current gold production of roughly 2,800 tonnes or 90mm ounces per annum.

Realistically, 50% or more of the deposits in the database will most likely remain deposits 25 years from now for a variety of factors including: permitting, ability to finance a mine, and attractiveness to a producer (producer balance sheets are so large they require significant projects to be accretive , making even most 1mm-2mm ounce deposits unattractive).

Consequently, the guaranteed depletion in the existing production mix coupled with a more realistic introduction of new mines into the mix (as opposed to our theoretical tomorrow scenario) makes it clear that barring multiple high-grade, multi-million ounce discoveries each year, a significant increase in gold production is unlikely. Moreover our back of the envelope calculations point towards gold production peaking at some point between 2022 and 2025 assuming the 90mm ounce per year figure is maintained.

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Gold

A Brief History of Jewelry Through the Ages

Jewelry has been coveted for centuries by many different cultures. Here’s a look at the history of jewelry, and how it’s evolved into a $348B industry.

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Jewelry has been an integral aspect of human civilization for centuries, but it was the discovery and subsequent spread of precious metals and gemstones which really changed the game.

In today’s infographic from Menē, we visualize how the uses and symbolism of jewelry have evolved across time and space to become the industry we’re familiar with today.

Antique, Yet Ageless

There isn’t a single corner of the world that’s untouched by the influence of jewelry.

  • Ancient Egypt
    Gold accompanied the affluent into the afterlife – the famous 1922 discovery of King Tutankhamun’s tomb was filled to the brim with gold jewelry.
  • Ancient Greece and Rome
    Jewelry was used practically, and as a protection against evil. The gold olive wreath design was highly popular during this time.
  • Mesopotamia
    Both men and women in the Sumer civilization wore intricate pieces of jewelry, incorporating bright gems like agate, jasper, or lapis lazuli.
  • Meso-America
    The aristocracy in Aztec culture wore gold jewelry with gemstones to demonstrate their rank. The jewelry also doubled up as godly sacrifices.
  • Ancient India
    The Mughal Empire introduced the combination of gemstones with gold and silver. Today, pure gold jewelry is often gifted to new brides for financial security.
  • Ancient China
    Both rich and poor wore jade jewelry for its durable and protective properties. Pure gold jewelry is making a fashion comeback, doubling as a form of investment.

Modern Jewelry: At a Crossroads

Today, jewelry is at once the very same and vastly different from what it used to be.

The industry is worth upwards of $348 billion per year, and it’s not hard to see why. As an alternative asset, jewelry has grown 138% in value over the last decade – only outperformed by classic cars, rare coins, and fine wine.

However, perceptions of jewelry vastly differ. It’s not a stretch to say that Western jewelry buyers are enamored with diamonds, given their enduring association with special occasions – but it’s interesting to note how that ideal was fabricated.

The Invention of Diamonds

The De Beers Group is well known for making diamonds great again. In the early 1900s, the company had already monopolized the diamond trade and stabilized the market, but they faced the challenge of marketing diamonds to consumers at all income levels.

The average American considered diamonds an extravagance, preferring to spend money on cars and appliances instead. The concept of engagement rings existed, but weren’t widely adopted. The #1 slogan of the century – “A Diamond is Forever” – transformed all that.

Even as more companies like Tiffany and Co and Cartier entered the playing field, De Beers had set a successful industry standard. But there’s a catch – diamonds are actually:

  • Not all that rare in nature
  • Intrinsically low in value
  • Easily replicated in a lab
  • Decreasing in sales

Despite these caveats, the popularity of diamonds illustrate how Western consumers do not approach jewelry in the same way as Eastern economies, where its function as a store of wealth persists.

The Eastern Gold Standard

In Eastern economies, jewelry often takes the form of pure gold. The reasons behind this difference are surprisingly pragmatic: gold is considered a secure and innate store of wealth that maintains its purchasing value over decades, allowing families to pass wealth from generation to generation.

The rich history of the precious metal has made it a sought-after commodity for centuries, and China and India drive more than half of global gold jewelry demand every year:

YearShare of Demand (India + China)Total Global Jewelry Demand (tonnes)
201457%2510 tonnes
201558%2426 tonnes
201655%2068 tonnes
201757%2201 tonnes
201858%2200 tonnes

Source: Gold Hub – Values have been rounded up to the nearest tonne.

Why are Eastern cultures so attracted to the properties of pure gold?

Part 2 of this series will show why gold is the world’s most incredible metal, and why it’s coveted by billions of people.

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The Future of Gold Exploration is Under Cover

Gold exploration has seen diminishing returns for years, but exploring through cover could be a way to unlock the world-class deposits of the future.

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The Future of Gold Exploration is Under Cover

Over billions of years, extraordinary amounts of gold and other metals were deposited and spread throughout the Earth’s crust. Humans have been searching for these rich deposits for centuries, and advances in geoscience and technology have helped us become more adept at finding them over time.

However, even with today’s advancements – almost all early-stage prospecting methods are still based on the same key principle: trying to find areas of exposed bedrock, called outcrops, that indicate an orebody is near.

But such outcrops only form in certain circumstances – and what happens when a geological system doesn’t come in contact directly with the surface?

The Problem of Cover

Today’s infographic comes to us from Nevada Exploration, and it identifies the problem behind finding these “hidden” deposits that do not leave a helpful trail of clues on the surface.

Instead of having outcrops where rocks can be readily sampled, these deposits are trapped underneath large amounts of soil and gravel. Geologists call this a covered setting, where they must first find a way to “see through” the cover in order to identify what geological systems really exist below.

Seeing through cover can be expensive and difficult to do, but it also has big potential upside.

There is no reason not to assume as much gold still exists as has been mined in the past, but prospectors, explorationists, and geologists have found the easy gold.

– Dr. Richard Goldfarb, Ph.D., United States Geologic Survey

In fact, many geologists think that the next game-changing gold deposit could be found under cover.

Exploration 2.0

For explorers, it is no secret that the cost per discovery is going up dramatically over time. The reality is that traditional exploration methods are achieving diminishing returns, and as a result companies are settling for lower grade deposits, more complex geological settings, and politically questionable jurisdictions.

Minex Consulting says that between 2007-2016, there has been $65 billion spent globally on gold exploration with only $30 billion worth of discoveries to show for it. Those aren’t exactly inspiring economics for future gold explorers.

But for every industry problem, there is often a precedent to be found elsewhere – and an interesting situation that is analogous was faced by the oil exploration industry years ago. They had reached diminishing returns with shallow water deposits, and developed technology to go deeper. Suddenly, monster deposits were being found again.

Experts involved in mineral exploration see the same thing happening with cover.

With the transition to under cover exploration, the minerals industry is undergoing a transformation much like the petroleum industry transformed to deep sea exploration some decades ago.

– Cam McCuaig, Principal Geoscientist, BHP Billiton

In other words: whoever can figure out how to explore under cover could be reaping big benefits.

The Prize

In the world’s most prolific gold jurisdictions, there are massive amounts of land that have not yet been explored because of cover. In Canada and in Australia, over 70% of land is covered. In Nevada, which produces the most gold ounces per square kilometer, about 55% of land is covered.

Interestingly, Nevada has produced 225 million oz of gold to date, but the majority of these discoveries have come from outcrop clues on the surface. Imagine what gold could be hidden under soil and gravel within the valleys of the state.

Global data so far suggests that deposits discovered under cover tend to be 2-4x bigger.

Exploring Under Cover

While the idea of unlocking this potential is extremely exciting, it also poses a significant technical challenge.

Conventional tools are poorly suited to covered settings, and existing techniques for systematic exploration don’t work. The end result is high-risk, high-cost exploration.

To successfully explore through cover, companies need:

  • New technology to see through cover
  • A way to lower the costs of testing targets
  • A way to directly test covered bedrock

So far, a few ideas have been pioneered for seeing through cover – and it will be interesting to see what results they bring in.

Biogeochemistry: In Australia, explorers are using biogeochemistry as a hint to see what lays beneath the soil. Plants accumulate pathfinder elements in them, or even tiny amounts of gold, which allows explorers to get a hint at what lies deep below.

Hydrogeochemistry: In a place like Nevada, there are massive valleys in the middle of prolific gold districts that have remained unexplored because they are covered with hundreds of meters of gravel. Testing groundwater might be the key, because groundwater flows by gravity from mountains to deep in the valley centers. On the way, this water interacts with bedrock – and any gold deposits that are hidden beneath the surface.

Explorers are looking at other ideas as well, ranging from regional-scale mapping to adapting other oil and gas industry techniques. If any of them are able to unlock the secret of exploring through cover, it could be the catalyst for industrywide change, as well as the discovery of the monster deposits that will meet our mineral needs of the future.

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