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overtheedge
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Peak Gold

- Andrey Dashkov - Casey Research

The one aspect of peak gold that must be considered is peak cheap exploration. Almost all the easy and cheap to locate new deposits to be found have been.

With only a few percent of deposits ever being developed based upon grade and size, exploration costs are already high. With potential new deposits being located in difficult to access terrain, inhospitable countries, under many meters of regolith and several other adverse conditions, exploration costs will sky rocket much higher.

As you pointed out, a rising gold price can make an uneconomical deposit profitable as long as the price stays high and energy costs moderate. This condition sets the stage for serious problems that are often overlooked: stockholder pressure. Stockholders tend to be as eager for a quick ROI (rising stock) as a teenage boy on a hot date. They push for increased production when the profit margin is still marginal. All this accomplishes is increased capital expenses that make profitability more difficult if the gold price drops. Loans MUST be paid.

In any discussion of peak gold, we must consider the new "all-in" cost metrics. And here is where that high exploration cost come back in. The exploration junior will demand a higher price, because of the location, the drilling crew will have very high costs, everyone sees escalating costs. Is the world ready for $20, $50, $100 million USD for just the exploratory costs? How many of these high priced, but marginal deposits can a major wisely walk away from before stockholders scream bloody murder? There are too many variables that miners have no control over; energy, labor, governments, environmentalists, etc.

We best not forget regulatory expenses. Look at how much the Pebble Project (Alaska) has spent already in environmental research prior to any permitting process.

Peak gold is real and if you look quick, you can see just a glimmer of that peak fading in the rear view mirror.

Good article.

Commented 4069 days ago

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Beginning of the headline :In the mining business, it is said that grade is king. A high-grade project attracts attention and money. High-grade drill intercepts can send an exploration company's stock price higher by an order of magnitude. As a project moves to the development stage, the higher the grade, the more robust the projected economics of a project. And for a mine in production, the higher the grade, the more technical sins and price fluctuations it can survive. It is also said that the "low-hanging fruit" of h... Read More

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