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Gold Shrinking Reserves

PWD Blog Post Gold Reserve

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Headlines - Gold Reserves are Shrinking

Forex: drops by $1.09 bn to $529 bn a sharp decline in Gold Reserve (Nov 11, 2022)

“The gold reserves dropped by $705 million to $37.057 billion”

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S&P Global: World’s Top Gold Producers’ Reserves in Decline.

“The world’s major gold miners have seen their economically minable gold reserves decline over the past 10 years”

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Nikkei Asia: Gold snatched up by central banks at fastest pace in 55 years. (Feb 1, 2023)

“Net purchases of the metal by central banks in 2022 totalled 1,135 tonnes in 2022”

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IMF: gold remains an important reserve asset and the IMF is one of the world’s largest official holders of gold.

“The IMF holds around 90.5 million ounces (or 2,814.1 metric tons) of gold at designated depositories.”

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A Gold Shrinking is taking place in the world, and we ask why Newmont, the largest gold miner in the world with headquarters in the US, launched a $17 billion stock-only offer for Australia’s Newcrest Mining. According to 2020 research by S&P Global Intelligence, the most obvious response is that the remaining reserves of the leading gold miners in the world are decreasing. If approved, the agreement would expand Newmont’s output of copper in addition to gold.

Around 61 million ounces of gold, 11 million tonnes of copper, and 29 million ounces of silver were listed as Newcrest’s reserves in August of last year (2022). The offer made by Newmont is not expected to be the final or the only one.

The world’s top gold miners have suffered a reduction in their commercially minable gold reserves over the past ten years due to a lack of fresh discoveries and a change away from growth-focused tactics towards margin preservation. Top producers are expected to replace their depleted pipelines by boosting organic exploration in the near term while utilising targeted acquisitions because they deal with diminishing production profiles, shrinking reserves, and rising production costs.

For the 2010–19 period, the combined remaining years of production for sixteen of the world’s top 20 gold miners they decreased, including top producers Newmont Corp., Barrick Gold Corp., AngloGold Ashanti Ltd., and Kinross Gold Corp. From 24 years at the beginning of the era, Kinross had just nine years left at the end of the year.

Gold Shrinking Supplies by PWD Media

Picture reference by S&P Global

Gold Reserve is the Survival of Gold Mines

Gold mining enterprises’ survival and continued operation depend on their ability to keep swimming, find new gold seams, or otherwise replenish their holdings. The World Gold Council reported that 2019 saw the first global production reduction in ten years, a 1% decrease in new gold mine production, making it a positive year for the industry. In that same year, the management consulting firm McKinsey released a report suggesting that there was a “crisis in gold mining reserve” and that “many of the world’s major goldfields” were dealing with “the issue of depleting reserves… there is a risk of exhausting, or nearly exhausting, reserves for many gold companies.”

It appears that reserves are dwindling; the known quantity of gold in the ground has decreased from 1.1 billion ounces from 124 deposits in the 1990s to 674 million ounces from 93 deposits since 2000. Lower reserves and slower production: the average time from discovery to production has increased from eight years in 1985 to more than twenty years today.

However, while individual gold mining companies are under increased pressure to discover new gold reserves or acquire them from competitors, the notion that we are approaching “peak gold” must be deconstructed. The maximum rate of gold extraction will be reached at some point (which may already have occurred). However, this is not the same as peak supply; gold is infinitely recyclable.

Gold’s likely future is that as the race to discover new reserves intensifies, so will mergers and acquisitions among gold mining companies. As the difficulty of extracting new gold from the ground becomes more apparent, the gold price will likely rise where gold holders – of jewellery, bars, and coins – are tempted to resell and recycle their gold.
Unless gold investors believe the price will rise even further.

Disclaimer
PWD Media Owners or its employees are not registered investment advisors and do not provide financial advice. Comments on this page are only an expression of opinion. While we attempt to illustrate the potential benefits of investing in precious metals, remarks, links, or advertising on this website should not be interpreted as advice to purchase or sell a commodity at any time. While PWD Media makes every effort to ensure that all of our comments are genuine and correct, we employ third-party data and rely on our reputable sources’ credibility. Before making any investment decisions, PWD Media suggests you contact a knowledgeable investment advisor.

Securities disclosure.: I, Beat Süess, have no direct investment interests in any of the companies mentioned in this article.

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Latest Update on February 17, 2023

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