TOP 5 GOLD PRODUCERS: Stunning Decline In Gold Productivity

This is a chart every gold investor needs to see.  While the gold mining industry works harder every year to produce the highly sought-after monetary metal, its overall productivity continues to decline.  Actually, decline is too soft of a word to describe what’s taking place in the world’s leading gold producers.

If we look at the at the top five gold producers since 2005, their productivity deteriorated a stunning 50% since 2005.  In 2013, the top five gold producers (Barrick, Newmont, AngloGold, GoldCorp & GoldFields) consumed the most diesel ever:

Diesel Consumption At The Top 5 Gold Producers

In just nine years, the top five gold producers nearly doubled their diesel consumption from 320 million gallons (MG) in 2005 to 591 MG in 2013.  I haven’t updated these figures for 2014, because most of the companies haven’t released their figures for 2014 (found in their Sustainability Reports).  The reason I am posting this information on 2013’s figures now… I failed to update some of this information last year.

Here is the breakdown of the individual companies diesel consumption:

Total 2013 Diesel Consumption

Barrick = 220 million gals

Newmont = 179 million gals

AngloGold = 95 million gals

GoldCorp = 65 million gals

GoldFields = 38 million gals

So, why is this such a big deal.  Well, if we look at the next chart, it puts it all into perspective:

Top 5 Gold Miners Gold Production & Diesel Consumption

The top five companies diesel consumption per ounce of gold produced doubled from 12.7 gallons per oz (gal/oz) in 2005 to 25.8 gal/oz in 2013, while production declined from 25.2 million oz (Moz) to 22.9 Moz respectively.  This has everything to do with decline of average gold yield from the group which fell from 1.7 grams per ton (g/t) in 2005 to less than 1.2 g/t in 2013. 

Basically, the top five gold miners have to move a lot more ore to produce the same (or actually less) gold than they did just nine years ago.

One company that released their 2014 energy consumption figures was Newmont.  Actually, Newmont’s total diesel consumption declined from 179 MG in 2013 to 158 MG in 2014.  This was due to lower gold production as well as much lower volumes of waste rock.  Newmont’s waste rock fell from 620 million tons in 2013 to 398 million tons in 2014.  I would imagine part of the reason for the decline in waste rock was due to Newmont high-grading its mines.  This is the mining technique of extracting the higher grade ore, resulting in higher gold yields with less waste rock removal.

I believe Barrick’s diesel consumption will also decline in 2014 as they cut back on the construction of many projects and also high-graded some of its gold mines.  2013 may turn out to be the year that the top five gold producers peaked in their total diesel consumption.  Thus, peak of global gold production may be close at hand.

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SIlver Chart Cover Graphic 3D shadowLastly, I wanted to mention the release of THE SILVER CHART REPORT next week on Tuesday.  The report has 48 silver charts from some of my work over the past six years (all updated), including many new ones never seen before.

The report includes a silver price chart that I believe very few, if any in the precious metal community have ever seen before.  Even though my readers have seen a few of my silver price charts in previous articles, this one is brand new.  One look at this chart, and the investor will clearly see why silver  traded a certain way over the past 100+ years.

THE SILVER CHART REPORT is made up of five sections that cover the silver market and industry like no other single publication on the internet.

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28 Comments on "TOP 5 GOLD PRODUCERS: Stunning Decline In Gold Productivity"

  1. Steve,

    Do you believe they continued to high grade mine through 2014 despite the collapse of oil prices in 2014? Was this just to prop up thier financial statements?

    If so, doesn’t this mean that when they have to go back to the lower grade ores and at the same time, that their fuel consumption will go back to significantly higher gallons per ounce?

    And if that happens,won’t the total cost for an ounce of gold will rise significantly?

    So in the face of peak oil, we really do have the prospect of peak gold.

    You are absolutely right, it is going to be one wild ride.

    Thanks,

    SteveW

    • SteveW,

      It depends. When I get time, and when they all release their 2014 Sustainability Reports, I am going to calculate an average gold yield of the top 5 and compare it to 2013. We will know how much high-grading impacted the average gold yield of the group in 2014.

      If they did high-grade many of their mines, yes… they will have to deal with the lower more unprofitable ore that remains. High-grading is like using up ones SEED CORN.

      steve

  2. You can’t fake the gallons.

    It’s even worse than the bar graph might indicate, because heavy machinery has become more efficient in the past 10 years and moves more dirt per gallon of fuel. I would also suspect that management has become fuel and fuel-type/cost conscious. Electricity from the grid or natural gas substituted for Diesel gensets (lighting, pumping, etc.) where possible, and with a vengence during the $4+ Diesel peaks.

    Conclusion: $1200 gold is cheap. sub-$20 silver is cheap. Good steel, aluminum, copper, nickel, tin, zinc, even portland cement and plywood, are all results of massive energy input, and are currently cheap. Time to build a fireproof bunker/shed, back up the truck for multiple full loads.

    Peak everything.

    • Including humans………….

      • Exactly, as all those good things are valued by and valuable to humans exclusively. Less humans — less value. Hence there are many more variables in value calculation than available energy and mine productivity. What has always been an unknown or a constant, becomes a variable, and then a stochastic variable due to incomprehensible complexity of the system. Fun fun fun.

        • As abundant cheap energy becomes less available, not only will there be less support for growing a GDP, there will be less energy and petroleum products and byproducts to sustain the massive world population. The population explosion over the last 100 years [arbitrary number; choose post WW2 if you want] can be directly related to cheap abundant energy and a higher EROI THAN WE HAVE NOW, let alone the future.

          • Exactly. Less energy — less people. Less people — smaller economy. Smaller economy — less material inputs, including energy. And so on in a cycle until the economy stops shrinking and a new equilibrium is established.

      • Food is mostly energy, when we buy it at Costco.

        Subtract the Diesel and jet fuel input, and most grocery store shelves would be bare, most of the year. Food would be insanely expensive, if you could get it. Local food producers will need heavy security, and will become rich if they are capable of running on 10% of typical US farmer Diesel input and still delivering some amount of food. EBT cards will be good for scraping ice and ID at the FEMA camp.

        Lots of current US cities will be 1994 Sarejavo politically, and NOLA Katrina physically, with some Ann Arbor demographic thrown in, without foreign aid. Got DIY?

  3. I could be interesting to see total energy consumption broken down by type of energy, not just diesel.

    • John,

      Yes, that would be interesting. The reason I focus more on diesel rather than say electricity is due to the fact that I believe petroleum liquid fuels will peak first. I have looked at most of the data from these big gold mines and the majority of energy consumption is DIESEL & ELECTRIC.

      For example, Newmont did release their 2014 data and stated the following consumption of Coal vs Diesel:

      Coal = 50%
      Diesel = 43%
      Other = 7%

      Remember, coal represents their electricity they receive from various countries utilities. And, some remote mines have to use diesel as a source of electric generation as they are unable to access the grid.

      I have a great chart coming out on the energy consumption in the Chilean Copper Industry.. the largest copper producing country in the world. Talk about how a decline in copper ore grades now consumes a hell of a lot more diesel in the production of copper.

      steve

  4. Nothing an increase in the gold price, measured in dollars or in purchasing power can’t fix. The EROI is a great tool for determing the true price of mining products.

    • Brent,

      You are actually SPOT ON. This is one topic I haven’t even discussed. The falling EROI – Energy Returned On Invested should also push the value of gold and silver higher. Unfortunately, most of the world’s wealth was funneled into PAPER ASSETS that have no real value. This is where the inflation went. This is where the falling EROI went.

      When investors throughout the globe wake up to the fact that they are the BIGGEST BAG HOLDERS IN THE WORLD, we are going to see a massive move into the physical metals. This will force the value of gold and silver higher to crazy levels. Thus, the resetting of actual INFLATION and the FALLING EROI will be shown in the new value of the precious metals.

      steve

      • “When the world wakes up that they are the BIGGEST BAG HOLDERS IN THE WORLD, we are going to see a massive move into the physical metals.”

        At least a massive ATTEMPT to move into physical metals.

        There may be a lot of copper for folks to buy, or zinc, lead, tin, and aluminum. But there simply isn’t much silver available for hundreds of thousands to move into. There isn’t enough for 10-20 billionaires to move into.

        Forgetting details, but around 2008 I think, the COMEX was still placing the price of silver at “X,” but physical silver was selling at much higher premiums than it is now…with longer waits.

        • An attempt only, as ‘a massive move’ requires an opportunity to make that move at that time: functioning markets, functioning banks, an equally massive move from physical assets into then-worthless paper, and a complete lack of ad hoc barriers (anti-hoarding, anti-money-laundering, anti-whatever) — all of these conditions are unlikely to be satisfied when ‘the world wakes up’. More likely the world will be rudely woken up and simply keep the bag — as it already happened in Cyprus.

          • Yes, the powerful AND wealthy will have the first opportunities at the PM feeding trough in a fiat currency confidence crisis. The others that will, would probably be those that have physical cash or gold to exchange for silver, or vice versa. The time for most of us “little people” to accumulate PM’s, even if it is just a few ounces of silver per month, is NOW.

        • David,

          Couldn’t agree with you more. Silver is so much more rare than gold… it’s not even funny.

          steve

        • The “little people” are moving into PM. Silver Eagle sales have been setting records 3 years in a row. Old silver coins I see on EBay are going off at huge premiums to melt. A large number are common junk coins, not collectible per se. Fractional ounce gold coins, particularly the old US & European, have also been going off at record premiums to spot. People are buying out dealer stocks 1 coin at a time despite no special deals on anything. The PM markets as a whole don’t reflect this because the old coins are simply changing hands. It’s clear more and more people are sure the house of paper will go up in flames and are acting accordingly.

          • OutLookingIn | June 28, 2015 at 12:51 pm |

            Yes. Premiums are creeping ever higher with each passing day.

            Case in point:
            One tenth ounce gold maple leaf coins, as of Friday.

            Gold spot price – $1,176.80
            1/10 oz. gold maple – $163.20
            Premium over spot per coin – $16.32

            The smaller the coin – the higher the premium. These smaller coins will be in great demand when TSHTF Its the difference between going shopping with a thousand dollar bill versus a twenty. Watch for premiums to go much higher quickly, for the smaller weight coins.

          • Just like the Gold:Silver Ratio is an interesting ratio to watch, premium percentage on fractional (.5, .25, .187 like 20F, .10 and .05 OZT coins from whatever source) gold as well as premium on pre-1965 US silver non-numismatic coins (inside the USA as a sentiment indicator because the data set is over 50 years long) will tell a story different, and earlier, than the MSM.

            Price, availability, and premium do not exactly track each other. Some of the data is regularly faked for various reasons, like a low offered premium on coins that can not be had. The only solutions is to not imagine that you can buy (and get!) at published prices or premiums, and to count only that metal that you actually have in-hand.

            Anecdotally, I see a brisk business at my local coin/key/comic book dealers in small gold and junk silver. The customers are buying an amount that might be a week pay for them, a couple hundred to about a thousand. Rarely, do I see the good deals of years past (+3% premium fractional circulated gold) and have settled for paying 5% or 8% on neat coins like Swiss 20F or French Rooster 20F. Almost a fifth of an oz of gold is a good size for medium purchases, with rolls of silver dimes for change.

  5. Robert P. bailey | June 27, 2015 at 1:12 pm | Reply

    I think that nearly everyone has some knowledge about the term ‘Peak Oil’, and I think that this term is true, but in connection to the term ‘Peak’ alot of commoditity watchers have missed the point that there is also a forgotten term called ‘Peak Gold’.

    Peak Oil will have a nock-on affect to Global Gold production, I am not a Gold Worshiper (Bug), but I think that Gold IS NOT A REAL COMMODITITY IN THE SENSE OF THE TERM !, the reason being is that world history gives the answer that Gold has been a real store of value, real hard asset, real Money for over 5,000 years!

    So that to put Gold in the same camp as the rest of the Commoditity market is a serious error ‘Post 1971 Nixon’ event, which has pruduced the situation of Gold being put in to this category of becoming a Commoditity. Its just like saying that ‘Paper is a Commoditity, so should not ALL Fiat Currencies from whatever country in the world should also be known as a Fake Commoditity, being made out of ‘None intrinsic valued’ product, by 99% of nation states! A great mistake of the importance of Oil, and Gold and finding a replacement of both has lead to the almost Global conspiracy of manipulations in all world markets because of Global politicals.

    The present day global agenda around the western world has always used these two very important hard and liquid assests of Gold and Oil in both literal Middle east conflicts and now a full all out Currency wars of the established Markets, and the up coming Brics nations.

  6. I would be interested in your views, Steve (or anyone) on platinum! It’s rare and precious too.

    The UK published a report in 2012 on rare metals and supply risk, the platinum group metals were at higher supply risk than either Au or Ag. But, rare earths and tungsten were the top two at-risk metals…!

    http://www.bgs.ac.uk/mineralsuk/statistics/riskList.html

    • In a non-manipulated, physical supply/demand price discovery, platinum and palladium should go more up in fiat currency units than gold.

      “Platinum is much rarer than both gold and silver — so rare, in fact, that all of the platinum ever mined could fit into your living room. And palladium is even rarer than that.”

      https://www.outsiderclub.com/report/platinum-and-palladium-more-precious-than-silver-and-gold/935

    • 38BWD22,

      If you look at the metal production widget on the bottom right side of the site, you will see the just how much more gold is mined than platinum or palladium. Platinum and Palladium are both currently about 3 million oz so far this year compared to 37 million oz of gold.

      The problem with platinum and palladium is… while they are more rare and precious, they do not have the 2,000+ year history as monetary metals.

      steve

  7. Steve, very interesting posting indeed ! Thank you !

    What’s diesel’s percentage in today’s production costs and where do you expect this share to go after PO ? Thanks, A.

  8. What’s the diesel consumption per ounce of silver?

  9. Great info. I was actually going to ask when we would be able to pay you for you work. Because it’s ridiculous how much valuable info you put out without asking anything in return.

    I will gladly buy your silver report tomorrow, good sir.

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