Gold miners need $3,000 price in five years - gold council

[Serpo]

Mon May 14, 2012 10:27pm EDT

* Mining costs increasing steeply
* Emerging markets, central banks to drive demand
May 14 (Reuters) - Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday.
Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.
"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term.
Spot gold fell to a four-and-a-half month low of $1,556.5 an ounce on Monday on concerns over the European debt crisis. Normally a refuge for investors in times of economic turmoil, gold has recently traded in line with risk assets like base metals and stocks.
Future demand would come from emerging markets, central banks and investors, Shishmanian said, noting that China (http://www.reuters.com/places/china) and India now represent 55 percent of the world gold market.
"Emerging markets are going to hold increasing amounts of gold reserves," Shishmanian said. "Holding billions of dollars doesn't help them. The alternative potentially is gold."
Exchange traded funds backed by gold currently hold $120 billion, he said.
"This is the tip of the iceberg," he said. "U.S. pension funds do not hold substantial amounts of gold but we see that changing over the next 20 years."


http://www.reuters.com/article/2012/05/15/peru-mining-wgc-idUSL1E8GF0AR20120515

[gunDriller]

if your "ore" is yielding 3 grams of gold per Ton, yeah you need a high price like $3000 to pay the energy & chemical costs of moving & extracting that ore.

but not all ore bodies are down to 3 grams per ton.


personally, i think Barrick's heap-leaching operations in South America should be shut down. all they do is destroy the environment of the host country.

[Sparky]

"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business..."

Alarmist nonsense. It would be like a stock analyst saying that if this continues for the next five years, the price of a share of Apple will be $20,000. You can't simply extrapolate a short term trend into the long term.

[gunDriller]

"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business..."

Alarmist nonsense. It would be like a stock analyst saying that if this continues for the next five years, the price of a share of Apple will be $20,000. You can't simply extrapolate a short term trend into the long term.

apples & oranges.

the gold miners have largely picked the low-hanging fruit. their mining exploration reports now regularly report 3 grams per ton of ore as "reason to be enthusiastic about the stock".

http://miningfeeds.com/

the decline in ore yields is a long term trend. very different from Apple-mania.

[mamboni]

The gold price is dropping as zombie banks are forced to give up collateral (physical gold) to pay their margin calls--not because anyone is selling.

Jim Willlie explains it in very simple terms.


http://www.youtube.com/watch?v=CWTovOz7aoQ&feature=youtu.be (http://youtu.be/CWTovOz7aoQ)

[Sparky]

apples & oranges.

the gold miners have largely picked the low-hanging fruit. their mining exploration reports now regularly report 3 grams per ton of ore as "reason to be enthusiastic about the stock".

http://miningfeeds.com/

the decline in ore yields is a long term trend. very different from Apple-mania.

Yes, you make an important distinction; my example was an exaggeration, but my main point is that you can't simply extrapolate the trend like that. Do we expect the yield to be cut in half again by 5 years? What portion of the cost is unrelated to yield, for instance host country taxation?

I also question that $1300 is the current average per ounce cost. My guess is that is currently the cost for the most expensive working projects right now. I would agree that in five years, the most expensive operations would require gold at $3,000/ounce to be profitable. And I think that's about where the price will be.

[Neuro]

Yes, you make an important distinction; my example was an exaggeration, but my main point is that you can't simply extrapolate the trend like that. Do we expect the yield to be cut in half again by 5 years? What portion of the cost is unrelated to yield, for instance host country taxation?

I also question that $1300 is the current average per ounce cost. My guess is that is currently the cost for the most expensive working projects right now. I would agree that in five years, the most expensive operations would require gold at $3,000/ounce to be profitable. And I think that's about where the price will be.

I agree! I remember reading a few years ago when gold was around $800, that miners had costs for extracting gold from somewhere $200-700 on average (if I remember correctly), and probably the most expensive projects they were running was up towards $8-900. The market just works that way... If an operation is unprofitable for a long time it gets closed down. More expensive/difficult ores to mine come into play as price goes up. Certainly mining costs has increased due to increased fuel prices, but I doubt very much that they average $1300/ozt... There would still be gold mining if price went down to $300, but not very much.

[gunDriller]

Yes, you make an important distinction; my example was an exaggeration, but my main point is that you can't simply extrapolate the trend like that. Do we expect the yield to be cut in half again by 5 years?


extracting gold from low-grade ore is a lot of work. they are mining ore bodies outside the US that could not be reasonably mined in the US because of restrictions on cyanide heap leaching. you can get the gold out of those low-grade ores profitably, IF you're willing to trash the environment.

the gold industry has a history of mis-treating the locals. Sinclair's mining companies have a history (not necessarily a repeated pattern, just that "there were incidents") of killing local miners that opposed the intrusion of an operation financed & run by outsiders.

Barrick has a full-time staff dedicated to corraling the whistleblowers that put up sites like this, and has successfully used British libel laws to over-ride free speech laws, in the case of articles about Barrick's pollution.

http://www.porgeraalliance.net/background/international-support/norwegian-pension-fund-divests-from-barrick-on-ethical-grounds/

http://protestbarrick.net/article.php?id=521

http://www.protestbarrick.net/article.php?id=513


you don't need to destroy the environment to get the gold. the Bjorkdahl site in Sweden is one example. they don't use chemicals, they use techniques that rely on the density of gold to separate the gold.

Gold Ore Resources, who owned the Bjorkdahl mine, as acquired by Elgin Mining on May 1, 2012.

what i would like to show you is a picture of their mine tailings pond. it's a duck pond. quite a contrast from Barrick.


there are major environmental issues associated with processing the lower grade ore bodies. how long the communities in which they operate will tolerate them is TBD. given the history of the resource extraction industries in general, they will probably continue a tradition of killing & poisoning the locals.


i am curious what world gold production would be if all facilities that are a detriment to their host countries were shut down.

[mamboni]

extracting gold from low-grade ore is a lot of work. they are mining ore bodies outside the US that could not be reasonably mined in the US because of restrictions on cyanide heap leaching. you can get the gold out of those low-grade ores profitably, IF you're willing to trash the environment.

the gold industry has a history of mis-treating the locals. Sinclair's mining companies have a history (not necessarily a repeated pattern, just that "there were incidents") of killing local miners that opposed the intrusion of an operation financed & run by outsiders.

Barrick has a full-time staff dedicated to corraling the whistleblowers that put up sites like this, and has successfully used British libel laws to over-ride free speech laws, in the case of articles about Barrick's pollution.

http://www.porgeraalliance.net/background/international-support/norwegian-pension-fund-divests-from-barrick-on-ethical-grounds/

http://protestbarrick.net/article.php?id=521

http://www.protestbarrick.net/article.php?id=513


you don't need to destroy the environment to get the gold. the Bjorkdahl site in Sweden is one example. they don't use chemicals, they use techniques that rely on the density of gold to separate the gold.

Gold Ore Resources, who owned the Bjorkdahl mine, as acquired by Elgin Mining on May 1, 2012.

what i would like to show you is a picture of their mine tailings pond. it's a duck pond. quite a contrast from Barrick.


there are major environmental issues associated with processing the lower grade ore bodies. how long the communities in which they operate will tolerate them is TBD. given the history of the resource extraction industries in general, they will probably continue a tradition of killing & poisoning the locals.


i am curious what world gold production would be if all facilities that are a detriment to their host countries were shut down.

Gold ore grades have collapsed (on average) over the last 50 years. And oil prices are at record levels as depletion/peak oil sets in. So doesn't it seem like collective madness for mankind to consume ever increasing oil and gas to refine ever diminshing gold and destroy ever increasing parcels of land with pollution? Frankly, gold mining seems to be a business model headed for the extinction list. This is incredibly bullish for gold, unless of course governments simply declare gold the equivalent of ivory elephant tusks.

[Serpo]

The gold price is dropping as zombie banks are forced to give up collateral (physical gold) to pay their margin calls--not because anyone is selling.

Jim Willlie explains it in very simple terms.


http://www.youtube.com/watch?v=CWTovOz7aoQ&feature=youtu.be

Called the EASTERN COALITION BUYING GOLD

[gunDriller]

Gold ore grades have collapsed (on average) over the last 50 years. And oil prices are at record levels as depletion/peak oil sets in. So doesn't it seem like collective madness for mankind to consume ever increasing oil and gas to refine ever diminshing gold and destroy ever increasing parcels of land with pollution? Frankly, gold mining seems to be a business model headed for the extinction list. This is incredibly bullish for gold, unless of course governments simply declare gold the equivalent of ivory elephant tusks.


exactly !

our society has STRAAAAAAAAAAAAAAAAAANGE habits.

like sending 2 police cars, a fire truck, and an ambulance when someone calls 9-11. it's as if they were trying to maximize billing hours.

or Canada's agreement to use their natural gas to extract oil from the oil-sands. well - what if some Canadians want to take a hot bath ? it's COLD up there.


the other one that gets me, is the use of natural gas for cremation of human remains. it is the Standard Operating Procedure, people even do it on their pets.

well - what if we had to choose between cremation & heating our house ? OK, well, theoretically, it's possible to do both at the same time.