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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43 Comments on "The Market Underestimates The Tremendous Energy Consumption By The Gold Mining Industry"

  1. 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 | January 27, 2018 at 7:30 pm |

      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…

  2. 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.

    • 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.

  3. 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 puppet to make them immune against any future conpiracy theorists who claim that the world is corrupt.

    You focus on ONE topic and ignore everything around it. You have the gigantic hope that gold and silver will make you richer somehow. This blog doesn’t seem to be about idiology or justice or freedome . . just about how much gold WOULD be worth if people had a brain. That is (I am sorry) irrelevant and just trying to push the price a view bucks for your self.

    The dependence on fossile-energy made certain familys rich. And they will make much much more cash as long people fear missing energy and keep building their life on “technologies”.
    I think it wouldn’t be a huge surprise if they “discover” cold fusion after WW3 to go on since every pending patent goes through a filtersystem to “protect” the people. Unlimited Energy (to them) is a securitythreat because it enables (freedom) weapons they can not handle.
    So just because we have no access to other types of clean energy doesn’t mean there are none. After the war they will have something new to charge people for . . because everybody thinks they need it.

    Apart from that . . ask the amish-people what they think about this blog.
    Life and true wealth are not about oil and gold.

    • 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!

      • 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.

      • 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 the rich families who are not willing to give up their power over the people . . and would rather wipe them all from earth via their WW3. That is what we see today.

        The whole middle east is a well desgined huge button to start the World War without any possibility for an exit. That’s why there are dozens of “crisis” now at the same time.
        They will all blow up at the same time. India-Pakistan, Israel-Iran, Iran-USA etc etc . .
        The dollar/financialsystem dies . . and so will at least 3 Billion humans.
        Just because of psychopathic pigs . . not because fossile energy is actually important for life. So this site IS just about the theoretical worth of gold and silver.
        And that’s useless .. because the worth of PMs can only unfold if the financialsystem is long gone! It’s like meassuring Ferraris in Lamborginis. It’s aburd to use Dollars to calculate anything . . really.

        I mean think about it . . what does this site try to prove? Think about it?
        It’s interesting and all fun . . but not practical information.

        The rise of Gold and Silver will come with billions of deaths!
        If you survive you COULD be rich . . or just in hell.

    • Knowshitsurelock | January 25, 2018 at 5:42 am |

      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 to see.

      Anybody that thinks the Amish don’t value gold or Silver is a boob tube watching fool. Turn off the T.V. and stop being brain washed YOU MAROON (sic)

  4. 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

  5. @ 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.

  6. 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

    • 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.

      • 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.

  7. 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 | January 23, 2018 at 11:32 am |

      “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!

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

    • 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 🙂 🙂 🙂

      • 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 | January 23, 2018 at 6:36 am |

      Just a few weeks to go!

  9. 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 “Venezuela”.

    Once we get far enough down the back slop of the peak energy curve, the vast majority of metal mining will simply cease. Sure, the governments will commandeer energy supplies and do some select mining, but most large-scale energy intensive mining will just be too expensive. As the economy collapses, all metal “mining” will be recycling only. 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. Old garbage dumps will be reopened and harvested. We have picked all the low-hanging fruit. Look how deep South African gold mines are now! Buy while you can.

    • DisappearingCulture | January 23, 2018 at 12:04 pm |

      “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 | January 24, 2018 at 9:22 am |

      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.

  10. 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.

  11. 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 their robot technologies in the midst of Peak Oil?

    Thanks.

    • Reezy,

      Robots gaining momentum right at the time the world is getting ready to peak in oil production (2-5 years), is a perfect example of human intellectual insanity… and by that I mean, by using more complex technology to solve problems of existing complex technology. Also, robots take away jobs for those who actually buy things. Now, if we could train robots to go to Bars, buy Starbucks, I-phones, and automobiles, then I guess that could work for a while.

      But, as with all short-sighted human ingenuity, ROBOTS will be the straw that breaks the CAMEL’S BACK.

      steve

      • Since the beginning, isn’t it the common theme to replace an energy type with an even more complex one (supply chain and amount of elemental parts)?

        1.: human power
        2.: replaced by fire plus human power (gather wood)
        3.: replaced by coal plus human power and mechanical power combined longer distribution chain
        4.: replaced by oil plus human power and mechanical power, supported with digital intelligence combined with an even more complex supply chain and processing refinement
        5.: partially replaced by nuclear fission with a complex supply chain and very complex process refinement (uranium enrichment) together with a high sensitive operating environment
        6.: partially complemented with (in some cases irrational inefficient) renewable technologies
        7.: future partial replacement of older energy sources with nuclear fission (more likely stellarator device, than tokamak) with a very complex elemental mix, operating environment and supply chain like enhanced power grid together with energy buffers (batteries, capacitors).

        You may correct me if I’m wrong.

      • Michael Kohlhaas | January 24, 2018 at 2:56 am |

        That’s actually a great idea. Robots for consumption not for production!

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

  12. 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 membrane. The result is an electric field that vectors out, thus producing a flow of electrons (electricity). The energy is produced from a uniquely formed field. Silver can produce a highly efficient level of super conductivity, not necessarily with accompanied cold temperatures. Silver can produce similar electric output from its gaseous form. The super conductivity is associated with anti-gravity systems. Expect it to be combined with electric field-based propulsion systems. Bear in mind that World War II was used to keep some of this special energy technology protected, where many governments still today keep their science secretive. This trend is changing amidst certain accords, led by the Russian scientific community. Silver can be applied in a great many ways, and can be implemented in a broad variety of applications. The future next generation energy systems will have a common ingredient: silver. Please forgive the Jackass in the above explanations. They are being learned on the go by a person with basic broad scientific knowledge, while my specialty is mathematics, statistics, computing, along with finance and economics, not to mention Victoria Secret.”

    https://www.silverdoctors.com/silver/silver-news/jim-willie-the-storm-centered-upon-silver-is-coming-and-so-are-vast-changes-to-the-silver-market/

    • 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!

      • “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

      • “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

  13. 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……..

  14. 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

  15. 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 compared to bitcoin’s Proof of Work. Imagine having a low-energy currency, not dependent on politicians, banksters or oil prices. Only dependent on voluntary exchange and market consensus. It is already here. One must merely open their eyes, and check their own bias to see it is not only possible, but inevitable.

  16. Muhammad Aidid | January 25, 2018 at 5:32 am |

    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 implying his bullishness and confidence to persuade readers and precious metals community because most of the time , causation does not conclude relation. He’s been wrong or should i say too early in hundreds of his writings for years.Nowdays , he’s a bit smarter by not emphasizing ultra delusional state of denial. His braveheart prediction 2 years ago, he said crude oil may go down below usd20 per barrel and may even reach usd12. Now look .. since oil at usd26 handle , it is now at usd64. It has increased by more than 200%. If ones take his analysis and use it for trading, ones would be in a shithole right now. USD64 is more than 500% of his lowest mark for oil at usd12. So where his prediction right now? It’s a disaster ..

    Dont get me wrong, i like article like this to sweeten gold and silver investors nightmares/ decademares like me. Hopefully he’ll be right one day, problem is , he’s too far from reality. USD12 oil? A research that was never parallel to the result. Very poor. Sorry , i m not a troll, just fade up with this shithole place.A patriot will still love his country even if it is a shithole. MAGA.

  17. Thomas Malthaus | January 28, 2018 at 1:54 pm |

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

    • Thomas Malthaus,

      If the locals in Guatemala have their way, then I would suggest Tahoe Resources Escobal Silver Mine is going to be forced to shut down. I believe a few other commenters in the blog have provided additional examples.

      steve

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