The Market Underestimates The Tremendous Energy Consumption By The Gold Mining Industry

While the gold mining industry reports energy as only 15-20% of its total production costs, the total amount consumed by the industry is much higher.  The market underestimates the amount of energy consumed by the gold mining industry because of the way it is listed in their financial statements.  Thus, it takes a great deal more energy to produce gold than the market realizes.

Due to the complex supply chain system that we depend upon, most of the energy that is consumed in the production of goods, services, materials, metals, and commodities is hidden from plain sight. For example, a gold mining company will list “Tire Costs” in their Financial and Sustainability Reports.  However, even though a tire cost is listed as a material cost, the majority of a tire’s production cost comes from burning energy… in all forms and in all stages.

For example, Barrick Gold consumed nearly 25,000 tons of tires in 2013 on its mining operations.  According to the Rubber Manufacturing Association, it takes roughly 7 gallons of oil to produce a standard car tire.  And from the article, This Is What A $42,500 Tire Looks Like, stated the following:

One of the many unique aspects of the Cat 797 are its tires: More than 13-feet-tall, weighing 11,860 pounds, each Michelin or Bridgestone 59/80R63 XDR tire costs $42,500 and that’s when you buy the full set of six required by each $5.5 million truck.

Contains nearly 2,000 pounds of steel, enough to build two small cars and enough rubber to make 600 tires to put on them.

If the Rubber Manufacturing Association says it takes 7 gallons of oil to make one standard tire, and this article claims that the 13-feet-tall tire used by the Caterpillar 797 haul truck contains enough rubber to make 600 tires, then it takes 4,200 gallons of oil to make one of these giant tires. If we take a more conservative estimation of a smaller mining truck tire, it would likely consume at least 2,000 gallons or oil, or nearly 50 barrels of oil.

Furthermore, Barrick consumed 25,000 tonnes or roughly 50 million pounds of tires in 2013.  How many large mining tires did Barrick use in its mining operations in 2013?  Well, if we use a more standard mining tire called the Bridgestone size 40.0057, that is 11.5 feet tall, it weighs 8,500 lbs.  Thus, Barrick consumed nearly 6,000 of these tires in 2013 (I am using 2013 data because Barrick stopped listing its tire usage in later sustainability reports).

Regardless, Barrick lists its tire costs as a material cost.  However, if we take the time and dissect the entire “haul truck tire manufacturing and supply chain,” we will see that energy was the overwhelming cost in manufacturing one of these large haul truck tires.  Even though it takes 50+ barrels of oil to make one of these large tires, this does not include the steel, other materials, the electricity and labor used in their production.  We must remember, all the materials that were used in making a large haul truck tire was a result of a tremendous amount of energy all the way down the manufacturing and supply chain.

Goldcorp’s Production Costs: Don’t Report Full Amount Of Total Energy Consumption

Goldcorp, the fourth largest gold mining company in the world, published a breakdown of its production costs for 2018.  According to their Jan 2018 Presentation, labor (including contractors) were the largest cost at 46%, followed by consumables (15%), energy (14%), Maintenance parts (9%), Site costs (5%), Explosives (3%), tires (2%) and other additional costs (6%):

Goldcorp stated their labor costs were 27% and contractors at 19% for a total of 46%.  Goldcorp also broke down its energy costs to 7% for fuel and 7% for power (electric generation costs).  Even though energy is only 14% of Goldcorp’s total production costs, the majority of the other items listed received their value from consuming energy down their entire manufacturing and supply chain system.

Let me give you another example,  Goldcorp consumed nearly 500,000 metric tons (mt) of lime in 2016.  According to the U.S. EPA, energy was 31% of the material cost to produce lime:

Moreover, lime producers spend 3-4 times more on materials than they do on labor.  If we take the time and examine all the additional materials consumed in the production of lime, we would find out that ENERGY is the major cost in their mining, production, and transportation to the lime production plant.  So, even the lime producers underestimate the total energy consumption in producing lime because they list it in their “material cost.”

If we look at Goldcorp’s production cost breakdown chart above, the consumables, maintenance parts, site costs, explosives, tires and other costs received their value or market price from the burning of energy in all forms and in all stages along the way.  Unfortunately, we don’t see that because the energy is not considered because it shows up as a finished product, good or material at the gold mine.

Lastly, while labor accounts for 46% of the production cost for Goldcorp, without energy, there wouldn’t be workers.  Let me explain.  A haul truck driver makes a lot of money because the job is very stressful and takes a certain amount of skilled labor. However, all the haul truck driver is doing, is steering and controlling all the LEVERAGED ENERGY contained in that transportation system.

Not only did it take a lot of energy and capital to produce that haul truck, the amount of diesel the haul truck burns is quite high.  The Caterpillar 797F gets about 0.3 miles per gallon.  Thus, all the haul truck driver is really doing is controlling how energy is being burned.  Without the massive haul truck and its ability to move 200-400 tons of ore at a time, manual human labor would take quite a long time to move that much ore the old fashion way.

So, most of the labor today used in the gold mining industry is to control and manipulate trucks, machines and processing systems that do most of the work by consuming a tremendous amount of energy. While humans could be replaced by machines or more automatization, the energy can’t be replaced. A barrel of oil has the equivalent of approximately 10,000-20,000 human labor hours of work (depending on the wage).

Without oil or energy, it would take a large army of workers to produce gold today.  Actually, it would be impossible to produce anywhere near the 110 million oz of gold we are currently.

I will be explaining this more in detail in upcoming YouTube videos.

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Eddy
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Eddy

Steve
If human had to all the work, I suspect hardly or no gold would be produced. Most mining is deep, remote, and complex. No way could could man without machines move the quantity of dirt in an open mine. Also, all modern mining is taking very low grade ore. There might be some alluvial mining left here or there. What governments should do is mint gold coins with the gigantic lpiles they have and sell it off. Get the gold to the people over time.

Spanky Bernanke
Guest
Spanky Bernanke

Didn’t Canada already implement that strategy?? I wouldn’t be surprised if the U.S. already sold all their gold in Ft. Knox, and hand out paper notes in the place of gold. Workin’ pretty well so far, yes? LMAO Respectfully speaking, oil is the world currency–the dollar is the mechanism for attaining the world currency. BUT, what will replace oil? Can you imagine what will happen to the dollar when oil begins to run out? Ya, maybe gold isn’t such a bad idea…

ZAGRANDA
Guest
ZAGRANDA

I wonder what the price of gold and silver would be if it was mined exclusively with human or animal power? Probably more than the full days work for a silver dime price we had through out history.

Bukharin
Guest
Bukharin

I do not know about the animal power, but the price of human labour (human working energy) is always higher than the price of gasoline when they are used to generate the same amount of calory.

Arno Nym
Guest
Arno Nym

All wonderful and a nice brainexercise for sure. But still . . we will see a Third World War soon to cover up everything this retarded unsustainable oil-based dept-enslavement-system did to the people before they wake up from their retardation. Like they did everytime. Before Hitler came to power some villages (especially in Austria) sucessfully tested monetarysystems that made all people feel their worth instead of enriching a view and enslave all the others. So they misled Hitler with certain books to think that the worldconspiracy is jewish . . but nothing ever changed about the conspiracy. Hitler was their… Read more »

Serge
Guest
Serge

You may dream of cold fusion, that’s a scam, still in closed circles without real peer review and development.
Even thermonuclear fusion will take half a century (at best) to prove its feasibility to produce electricity at industrial scale (not talking of ITER but of a real power plant) and still the cost of electricity may be several times what oil or gas allow today.
Cheap energy is vanishing!

Bukharin
Guest
Bukharin

Of course. Nuclear industry is oil intensive in every step, from the mining of uranium, the processing (enrichment), the production of nuclear fuel rods, and the transportation of the rods to the nuclear power plants. Every step consumes much oil. Without government subsidies, no one wants to produce nuclearpowered electricity. It is just too expensive.

Arno Nym
Guest
Arno Nym

Cold Fusion is just an example. It’s more about the extreme criminal energy that is still well hidden. The point I wanted to make was that what we know as “needed” energy is a part of a big unnatural construct that has no big importance. Energy Shmenergy. Of course humans have to adjust and rethink what’s important in life and fight out small conflicts, but just because you can’t buy certain tropical fruits from around the world doesn’t mean your world is collapsing. Humans farm since thousands of years. The only danger that comes from the collapsing Oilpyramid comes from… Read more »

Knowshitsurelock
Guest
Knowshitsurelock

I have Amish neighbors. Most of them are flush w/ cash. They call it a necessary evil. They are flush w/ commodities as well. And they like, even prefer silver REAL money in there dealings especially the saw mills (happy to trade cedar lumber for ounces of silver). They are not backward or retarded. And they understand how the gov. is debasing our currency. The AMISH hate debt! They also have ALL the problems in their communities as we have in ours. They just deal w/ them in a better way and don’t air their dirty laundry for the world… Read more »

Erial
Guest

Article full translation into Spanish can be found on “El mercado subestima el enorme consumo de energía de la industria minera del oro” http://rumbocolision.blogspot.com.es/2018/01/el-mercado-subestima-el-enorme-consumo.html

Pieter
Guest
Pieter

@ Arno you have no clue what happened in Germany after WWI this has everything
to to with jewish banksters in fact same as it was in Russia. Read the history and if you can,t find it I will send you the links.

Marijan
Guest
Marijan

Yes, jews are to be blamed for all evil.
:facepalm:

SteveW
Guest
SteveW

Is it safe to assume that the analysis would be very similar for all the other precious metals and so too for the base metals?

In effect then, when the oil crises hits there will be no more mass metals mining.

Life is going to be very different.

Thanks,

SteveW

joah
Guest
joah

There will be mass metals mining but the value has to shift due to higher energy costs. And yes, life will become very different for many people.

Petedivine
Guest
Petedivine

I’m not so sure. I think we’ve wasted so much energy on worthless endeavors that future leaders will be forced to pick and choose which industries benefit from remaining energy reserves. I’m going to guess that energy intense systems like agriculture and transportation will take precedence over all but the most productive mines.

Terri
Guest
Terri

Great article!! The things you put in your articles just make me STOP and PONDER, what the heck this all means..! Wow…. Apparently, I am a literal pea-brain compared to others on your site….! Keep up the great work!

DisappearingCulture
Guest
DisappearingCulture

“Apparently, I am a literal pea-brain compared to others on your site….!”

Nonsense Terri! You are humbly trying to learn and understand…that is very smart!

Sammy
Guest
Sammy

Thanks, Steve.
Looking forward to your bitcoin charts when it reaches $6,000 😀

GrahamB
Guest
GrahamB

Are you sitting down Sammy? If you regard Steve’s $6000.00 as a low price; my price will give you will knock your sock off. I reckon that is too high. FAIR VALUE FOR Bitcoin IMHO should be around $5.00 🙂 🙂 🙂

CHX13
Guest
CHX13

The daily market cap of all cryptos will be roughly the size/fiat value of fizzical gold transactions, once gold (and silver) will be viewed as THE wealth asset to own, the only asset that can’t be inflated away (cryptos are being inflated away by more cryptos – where are we at no, like 1 500 ? ). The PMs will be the asset class that will restore confidence and will become once again a backbone to finance and trade over the come years/decades. Till then, happy “goldl-ing” and good luck making it through the coming storm.

Michael Kohlhaas
Guest
Michael Kohlhaas

Just a few weeks to go!

Bob
Guest

Steve is right. Energy is paramount in the scheme of things and it’s importance is is just not recognized my the vast majority in every walk of life. It seems that no one wants to wrap their heads around this. We are at peak oil. The application of vast amounts of central bank credit has distorted the markets and created what seems to be a surplus. Also, the vast majority of the big oil producing nations with their exploding populations are on the ever-accelerating treadmill of pumping to pay their bills. However, they are moving into the “drowning phase”; see… Read more »

DisappearingCulture
Guest
DisappearingCulture

“Teams of minimum wage serfs will be used to tear down and pick the bones of all the old vacant factories and empty commercial real estate…”

Didn’t you mean to type “minimum cost robots” where you typed “minimum wage serfs”? LOL

lastmanstanding
Guest
lastmanstanding

Interesting interview with Chris Martenson over at http://www.usawatchdog.com

He states that beginning in 2015 that oil finds were the worst on record going back to the 1920’s…worse in 2016 and even worse in 2017. He also claims that China is now (2018) reaching peak oil.

Getting interesting.

houtskool
Guest
houtskool

What about the tires of the Cat drivers car? Huh? Everything is oil, everything is surplus energy. Leveraged labour, like fiat currency is leveraged money. Works great uptime. Downtime its a casino run by junkies and psychos. You ain’t seen nothing yet.

Reezy
Guest
Reezy

Steve, I was wondering about what you thought of robots and their supposed future in taking away jobs from the masses of those who do menial labor. I can already imagine that robots would be rendered useless when the oil is no longer available, but with the stage of where robot technology is now, and with the stage of where oil is now, it seems like robots are gaining some momentum. Plainly. What is your thoughts on robots now and in the near future? Are these billion dollar businesses like Amazon just kidding themselves by improving and breaking ground with… Read more »

olegig
Guest
olegig

The usefulness of robots is directly related to the length of their extension cord.

GLP
Guest
GLP

Wouldn’t it be ironic indeed if silver becomes the very element that prevents the thermodynamic crash… “”Next comes the revelations and publicity of silver for its unique scientific properties, within the new energy production systems. Refer to electric fields, its lone isotope, harmonic frequencies, super conductivity, and associated electricity production. Gold has no known isotopes, but silver has one, a lone isotope which makes it extremely valuable. Expect next the introduction of implosion technology and single point energy output. Field energy through monotonic coating has become highly useful. Electro-harmonic frequencies have been converted to missing electrons, much like an osmotic… Read more »

Serge
Guest
Serge

Jim Willie’s statements on silver physical properties for energy systems are totally moronic.
Silver is not an interesting superconducting material, to start with (not even silver based materials, copper based ceramics yes).
Antigravity and the rest is all crap!

GLP
Guest
GLP

“Silver Crucial For WWII Bomb” ( seems silver was necessary to make the first atomic bomb)

“At Oak Ridge huge currents of electricity flowed through the coils, producing potent magnetic fields used to separate different types of uranium. Only uranium-235 atoms, slightly lighter than the more prevalent uranium-238, could blow apart in the kind of chain-reaction explosion that occurs in an atom bomb. The enriched U-235, obtained using the silver magnets in a painstakingly slow process, eventually found its way into the bomb that destroyed Hiroshima.”

Read more at: https://phys.org/news/2010-01-silver-crucial-wwii.html#jCp

GLP
Guest
GLP

“Scientists at Penn State University, in collaboration with institutes in the US, Finland, Germany and the UK, have figured out the long-sought structure of a layer of C60 – carbon buckyballs – on a silver surface. The results, which could help in the design of carbon nanostructure-based electronics are reported in Physical Review Letters and highlighted in the July 27th issue of APS’s on-line journal Physics.

Read more at: https://phys.org/news/2009-07-nanophysics-buckyballs-silver-platter.html#jCp

GLP
Guest
GLP

As virtually every asset class goes up this year and gold and Silver don’t, I will be using my amazing profits in the cryptos to accumulate TONS of silver.

It is much better to light a candle than curse the darkness……..

Dan
Guest
Dan

Can’t wait for you to post an article on the Greg Hunter Chris Martenson interview where Chris says Oil price is going to sky rocket

SD
Guest
SD

Steve is making the perfect case on why gold is terrible as an everyday currency. If we have hit peak oil, and EROI is continually falling, how do we keep gold flowing and actually used in a modern day economy? Not practical. Steve has previously compared gold v bitcoin in regards to costs of production – which is also very flawed. Bitcoin’s cost of production is not relevant to its USD price, and bitcoin is first generation crypto. Proof of Stake, dBFT, and other consensus systems will one day take over the crypto market, and they use nearly zero energy… Read more »

houtskool
Guest
houtskool

“Steve is making the perfect case on why gold is terrible as an everyday currency. If we have hit peak oil, and EROI is continually falling, how do we keep gold flowing and actually used in a modern day economy?”

Falling eroei and modern day economy in one sentence?

The modern economy as we know it is coming to a screetching halt before the year 2025. That’s why we need real money. Gold and silver. Without counterparty risk.

DisappearingCulture
Guest
DisappearingCulture
Muhammad Aidid
Guest
Muhammad Aidid

Steve talks a lot. Steve is a very unique and hardworking precious metals analyst. His charts and figures are easy to be understood and followed by readers. — Unfortunately here Steve’s tried to make a relationship between mass and energy. Just like Einstein’s most known formula .. E = m x c squared. But it’s already known to most even without Steve effort to prove his intelligence. Most would be excited with this kind of analysis without realizing that it’s nothing to be proven for. What Steve failed to do is he fails everytime to keep quite and stop from… Read more »

Thomas Malthaus
Guest
Thomas Malthaus

Any other gold or silver mines scheduled to close soon other than the Barrick in Chile-Argentina?