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Gold reserves growth dwindling globally

4th September 2020

 

Research agency Standard & Poor’s (S&P's) Global Market Intelligence says major gold miners globally have seen their economically mineable gold reserves decline over the last decade, owing to a lack of new discoveries and a shift away from growth strategies to margin preservation.

 

With top producers facing declining production profiles, shrinking reserves and a return to rising production costs, the agency is expecting many to expand organic exploration in the near term, while leveraging targeted acquisitions to supplement their depleted pipelines.Sixteen of the world's 20 largest gold miners – including top producers Newmont Corporation, Barrick Gold, AngloGold Ashanti and Kinross Gold Corporation – saw their overall remaining years of production fall over the 2010 to 2019 period.At the end of 2019, Kinross had just nine years of remaining production, down dramatically from 24 years at the start of the period.

 

S&P Global Market Intelligence has calculated each company's gold reserves changes, production changes, reserves acquisitions and divestitures, reserves developed through exploration, major discoveries, cash costs and ore grades from 2010 to 2019.The agency reports that only two companies – Zijin Mining Group and Fresnillo – had more remaining years of production at the end of the 2010 to 2019 period than at the start, while Gold Fields’ remaining years were unchanged at 20.During Sibanye-Stillwater’s seven years of operation since 2013, the remaining life of its reserves increased from 12 to 15 years.Overall, the remaining years of production for the miners included in a new report by S&P Global Market Intelligence, excluding Sibanye, fell by six years over the past decade, to about 14 from 20.

 

The miners included in the report are Newmont, Barrick, AngloGold, Polyus, Navoi Mining and Metallurgy Combinat, Kinross, Newcrest Mining, Gold Fields, Agnico Eagle Mines, Harmony Gold, China Gold International Resources, Polymetal International, Zijin, Shandong Gold Mining Corporation, Nord Gold, B2Gold Corporation, Kirkland Lake Gold, Yamana Gold and Fresnillo.

 

S&P Global Market Intelligence says that, throughout the period, some miners relied mainly on acquisitions to replenish reserves or bolster production, although some of their largest deals are now viewed as overpriced, ill-timed or ultimately unfruitful.The 20 profiled companies held 668-million ounces of gold in reserves at the end of 2019, sufficient for 14 years of production at 2019 rates. They accomplished this while increasing their aggregate production by 12%, from 37-million ounces in 2010 to 42-million ounces in 2019.

 

These companies replaced an average of 95% of their production over the 2010 to 2019 period, adding 397-million ounces of reserves (adjusted by 10% to account for recovery losses), while producing about 381-million ounces of gold.Additionally, S&P Global Market Intelligence finds that, over the ten-year period, the 20 top producers spent about $69.5-billion on acquisitions and exploration, representing an average cost of $175.15/oz for the 397-million ounces of replaced reserves.

 

Almost three-quarters, or $51-billion, of the group’s total expenditures went to acquisitions and accounted for 53% of reserves growth, while 26% of expenditure, or $18-billion, went to exploration and accounted for 47% of reserves growth.As reserves added through acquisition are initially much more expensive than reserves added through exploration, companies that emphasise acquisitions tend to have higher average costs for adding reserves than companies more focused on exploration, says the agency.It states that some of the reserves growth credited to exploration was, however, derived from upgrading resources and increasing reserves at acquired projects.

 

Eighteen of the 20 profiled companies made acquisitions during the 2010 to 2019 period, buying 209-million ounces of gold reserves for $51.3-billion for an average cost of $245.51/oz.Polyus and Navoi made no significant acquisitions of gold reserves during the period, but one of the top reserves buyers is Newmont, which acquired 56-million ounces of gold reserves between 2010 and 2019, at an average cost of $192/oz, mainly as a result of its acquisition of Goldcorp.

 

Newmont is followed by Barrick, which acquired 33-million ounces of reserves, including that of Randgold Resources, in 2019.On a cost-per-ounce basis, Kinross paid the most for gold reserves at $8.54-billion for 9.5-million ounces, or $899.38/oz, in its acquisition of Red Back Mining and operations.Including acquired gold resources, however, the cost for its acquisitions improves to $339.44/oz.Sibanye had the lowest average unit cost of gold in acquired reserves at $8.02/oz, followed by Harmony at $11.35/oz.Thirteen of the 20 companies analysed made divestitures during the period, selling 68-million ounces of gold reserves for almost $8-billion, for an average return of $116/oz.Moreover, S&P Global Market Intelligence finds that reserves developed from exploration cost significantly less than acquired reserves over the period.The 20 companies developed almost 188-million ounces of gold reserves by budgeting $18-billion.“Along with adding reserves at existing mines and converting resources to reserves at projects, the gold industry's long-term success depends on finding new resources in major discoveries.“Despite historically high exploration spending over the past decade, there has been a substantial decline in the number of new major gold discoveries, potentially constraining the long-term supply pipeline,” S&P Global Market Intelligence concludes.

 

Source: https://www.miningweekly.com/article/g