Peak Gold : Newmont says gold discoveries getting tougher

Discovering the next mother lode is not as easy as it used to be, the world's second-largest gold producer, Newmont Mining Corp said on Wednesday [2 Apr 2008], as it plans to spend nearly a quarter of a billion dollars on exploration this year. There has been a shrinking number of gold finds above five million ounces, Newmont's general manager for Australia Adriaan van Kersen told a gold mining conference in Perth. Only 4% of gold deposits in the world hold more than five million ounces in reserves. "Newmont depletes its reserves at 10 ounces a minute and needs a replacement discovery rate of near 14 ounces a minute," van Kersen said. Newmont counts about 86 million ounces of gold in reserves at its mines worldwide and has earmarked between $220-230 million for exploration in 2008.

Van Kersen cited Newmont's lack of a big discovery recently as indicative of the plight of the gold industry as the whole. "As an industry, we are spending more and more on exploration but even in a high demand and high price environment, and more drilling happening, the gold sector is not discovering the same ounces as it used to," van Kersen said. At the same time, costs for everything from buying trucks and fuel to hiring workers, up 24% in the last year, are biting into operations, he said.

- The remaining concentrations of natural resources are dwindling at a rapid pace. During the California gold rush in the 1840-1850's period, gold was a lot more readily available. People were panning for gold in rivers and digging near the surface. Today, gold mines go deep underground, down to 2 miles (3 km) for some South African mines. And gold ore concentrations are now measured in terms of grams per ton (g/t). If you were to think about it, what gold mining executives and resource investors are talking about is parts per million. Barely detectable levels. And yet there are companies working on these ores and there are commodity investors investing money in the companies working on these ores. At some point something has to give way, and resource investors like myself are betting that it will be resistance levels on prices of gold miners and of the gold price itself.

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