Size matters...Only fools sell SGR & GCSize seen pinching world's biggest gold-miners
--------------------------------------------------------------------------------
The world's biggest gold producers won't be able to sustain the millions of ounces mined every year, according to an industry consultant, because discoveries are not keeping pace with output and building new mines takes a long time.
Over the past 15 years, a spate of mergers and acquisitions has created a clutch of mega-sized gold-miners, with the top five each pulling between 3,5-million and seven-million ounces out of the ground every year.
Mined-out reserves need to be replaced through exploration if miners want to keep producing at these rates over the medium to long-term.
"The drive for increasing size in annual production has resulted in very large gold producers. But they are unlikely to survive at current extraction rates over the . . . next five to ten years," Edmonton-based consultant Ralph Bullis told the Prospectors & Developers Association of Canada conference in Toronto.
"It is highly unlikely, at least in my opinion, that new discoveries of a world-class size can be made on an annual basis by each of the very large gold producers," Bullis said, defining 'world class' as deposits of five-million ounces of gold or more.
Bullis worked for Echo Bay Mines for more than a decade in several positions, including exploration director. Echo Bay was bought by Kinross Gold in 2003. He was also a member of the Canadian Institute of Mining committee, which helped set up guidelines on how to estimate mineral resources and reserves.
Bullis said that while large producers have increased their output over the years, their reserve bases have not kept pace.
US-based Newmont Mining Corp, the world's No 1 gold producer, lifted production from 1,7-million ounces in 1992 to about seven-million ounces last year, mostly through acquisitions. But over that same time, reserves fell from 17 years of unmined production to 11.
Output at No 3 producer, Canada's Barrick Gold Corp, rose nearly four-fold over the same period, but its reserve life has dipped from 15 to 13 years, Bullis said.
Neither Newmont nor Barrick was immediately available for comment.
According to the US Geological Survey's database of global gold deposits, of the 792 finds listed of greater than 100 000 oz, only 6% contained five-million ounces of gold or more, Bullis said.
"Due to the nature and size distribution of gold deposits, along with their location and the difficulty of finding and delineating them, it does appear that this task (of replacing mined gold) is going to be extremely difficult," he said.
In the past three years, the world's largest miners have all increased their exploration budgets.
Even if a big discovery is made, Bullis said it can take anything between three and ten years to permit a mine in Canada and the US, prospective areas where the major miners are looking for gold. – Reuters.