Top 4 Gold Miners Average Yield Declines… Even With High-Grading

In order to survive in a manipulated low-price environment, the gold producers resorted to “High-grading” some of their mines.  By high-grading, the mining companies target higher ore grades in their operations to produce more metal while lowering costs.

Unfortunately, this short-term band-aid comes at a cost.  When the mining companies choose to high-grade they are left with lower quality ore in the future that is more expensive to extract.

If we look at the chart below, the top 4 gold miners increased yields in half of their operations, while the other half stated declines.  Barrick had 5 of its mines (regions) show a decline in average gold yields, while three had increases.

Top 4 Gold Producers Ore Grading Change

The largest increase in average yield at Barrick came from its Goldstrike mine which surged from 4.14 grams per tonne (g/t) in Q1 2013 to 6.78 g/t in Q1 2014.  However, Barrick’s Cortez mine’s average yield declined from 4.45 g/t in Q1 2013 to 1.27 g/t in Q1 2014.

Newmont suffered declines in yields at seven of its mines while five managed slight increases.  AngloGold reported increased yields at its underground and open-pit mines, however yields declined at its heap leach operations.

Of the top four, Goldcorp increased yields at its mines the most in the group.  Goldcorp increased yields at six of its mines, while only four stated declines.  The biggest increase in yields came from its Penasquito (+90%), Musselwhite (+25%), Alumbrera (+24%), Porcupine (+20%), and Wharf (+17%) mines.

Two of Newmont’s mines that experienced the largest decrease in yields were Red Lake (-27%) and Pueblo Viejo (-23%).

The table below shows the breakdown at each company.  As a group, the top four gold miners processed 141.3 million tonnes of ore to produce 4,593,000 oz of gold in Q1 2014 compared to 137.8 tonnes of ore yielding 4,560,000 oz of gold in the same period last year.

Q1 2014 Top 4 Gold Miners Average Yield

Here we can see that even with “High-grading” many of the companies’ gold mines, the average group yield declined from to 1.03 g/t in Q1 2013 to 1.01 g/t during Q1 2014.  The reason for the group’s average fall in yield was due to Barrick suffering a huge drop of a 1.53 g/t average yield in Q1 2013 to 1.24 g/t in Q1 2014.  Barrick also stated a decline of 209,000 oz of gold production year-over-year.

On the other hand…. Newmont, AngloGold and Goldcorp recorded increased gold production from increased yields.  Certainly, the removal of Barrick from the group, the average yield of the other three would have been higher.

That being said, Barrick is still the largest gold producer in the world…. so its top ranking brought down the average of the group.  This is seen more easily in the next graph.

Top 4 Gold Producers Change in Average Yield

So there you have it.  The top four gold miners overall production remained virtually flat while instituting their costly short-term solution of high-grading.  In utilizing high-grading, problems will only get worse in the future for these top gold mining companies.  Unless the price of gold rises considerably in the next few years, a lot of gold will remain in the ground… too expensive to extract.

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7 Comments on "Top 4 Gold Miners Average Yield Declines… Even With High-Grading"

  1. So, does that mean if one were to buy ONLY ONE stock, it would be better with Barrick, especially for the future,
    as there is less “hedging.”???

    • Kenneth,

      I don’t know if I would reach that same conclusion. The only gold mining company that I would consider investing in (besides royalty companies) is Goldcorp. They still plan on increasing production which would lower costs.

      steve

  2. The “problem” of gold miners facing lower yields/higher costs is not a problem at all – for those who manage the show from behind the scenes. While western miners face the prospect of lower returns AND accelerated lowering of ore quality, the Chinese continue to execute on their strategic plan to gain domination of the resource sector globally.

    Lower gold prices facilitate that plan in two – interlocking – ways. Building their own reserves of bullion is cheaper and easier with gold held at its current artificial price level… while weakened book value of miners makes them cheaper and easier targets for takeover.

    These takeovers are …as with the captured bullion banks themselves… done largely in an indirect manner. Forced originally by political factors to develop alternatives to direct buy out of western firms, the Chinese have mastered the art of using proxies and other methods to leverage their minority stakes into controlling interest. While ‘manipulation’ of the gold market is real… the narratives about the ‘manipulators’ are not. Cue much confusion in the minds of the innocent investor.

    Via a complex interplay of drug/oil/arms/blackops funding, Barrick was originally set up to facilitate control of the precious metals bizness by the Bush Cabal and associated partners in crime. As their access to such funds has eroded, Barrick has gradually been forced to transition into a stand alone operation… needful of actual returns outside of the managed books. At this, of course they are a signal failure. Break up is therefore inevitable. The Chinese will be able to scoop up the components[at a discount] by simply biding their time. In the future… when outright ownership is no longer barred them by bankrupt western governments… they will happily ‘manage’ the gold price to much higher levels. End of story.

    Meanwhiles… for the sleepwalker set… the band plays ever on – Jurassic Park style narratives which keep western investors caught in a grinding vice of hope and despair! One persons’ “problem” is another guys’ “profit!” While holding gold is a good entry point to the survival sweepstakes… it’s really rather important to be playing with a ‘winning hand!’

  3. Bob in Philly | June 4, 2014 at 5:58 am |

    Steve,

    Good insight and observations.

    We see very much the same thing today in the oil and gas industry, in particular,
    in hydraulic fracking operations. Start with the sweet spots first, drill hard, drill
    heavy, then move onto less productive areas of the formation play.

    The Marcellus Shale formation is a perfect example of this.

    The question always is will the price of the natural gas rise at level to allow
    hydraulic fracking in increasingly less productive areas of a given play and
    at a price people and business can still afford to buy the NG.

    Best,
    Bob in Philly

    • Bob in Philly,

      That’s a good question. I believe the real problem is that the United States doesn’t really have an economy. What we have is a LEECH & SPEND ECONOMY only possible by exporting inflation while we import real goods. With the current situation in Russia-Ukraine the BRIC countries are now speeding up the process in working around the Dollar.

      The collapse of the value of the Dollar will destroy the ability for Americans to afford high-price oil or natgas. This is part of the equation that many do not consider.

      steve

  4. This is pretty interesting stuff!

    Steve, in your estimation, how long can each of these companies go on mining “high grade” deposits?

    If the cabal keeps prices, say, another 6 months, can they go on doing it the entirety? Or, have they already probably tapped out their ace in the hole, already?

    Keep up the great work. I recommended this site to a new audience the other day. The response has been positive.

    • Nathan,

      I don’t have the exact data, but common sense tells me that it’s not going to be for years. Furthermore, the more of their high grade ore they extract, the less quality and more expensive ore remains. Thus, the gold mining industry resorting to High-grading will force higher prices in the future.

      Just want to say thanks for spreading the word to new audiences.

      steve

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