Top Gold Miners Burned Record Amount Of Fuel To Produce Gold In 2015

The top two gold miners burned a record amount of fuel to produce gold in 2015.  Even though Barrick and Newmont burned less overall fuel than their operations did in 2013, their consumption per ounce of gold produced was the highest ever.

This is not good news for the gold mining industry as the world has peaked in cheap oil production.  While total global liquid energy production continues to be at record levels, the high-value cheap light sweet crude oil peaked several years ago.  Furthermore, we are now witnessing the rapid decline of U.S. oil production as many of the shale oil fields go into terminal decline.

As shown in these next two charts, the Bakken and Eagle Ford are forecasted to be down 437,000 barrels per day (bd) from their minimum production between August 2014 and December 2015:

Bakken-Oil-Field-Production-Lost-Forever

Eagle-Ford-Oil-Field-Production-Lost-Forever

The production loss from these two fields will equal 160 million barrels in a year… and that’s if their production doesn’t continue to decline. Don’t worry… it will.  As I have stated in several interviews, I forecast U.S. oil production to decline 30-40% by 2020  from its peak in 2015, and be down 70-75% by 2025.  We will also start to see declines in other oil-producing countries throughout the world.

Top Two Miners Burned The Most Fuel Ever In 2015 To Produce Gold

That’s correct, Barrick and Newmont used more liquid fuel than ever to produce an ounce of gold in 2015:

Barrick-&-Newmont-Liquid-Fuel-Consumption-2005-2015

Between the two companies, they burned a total of 379 million gallons of fuel at an average 32 gallons per gold oz produced.  Even though Barrick and Newmont burned more fuel in 2013 (389 million gallons), their consumption per gold ounce was less at 30.9 gallons.

Here is the breakdown of the two individual companies fuel consumption:

Newmont-Liquid-Fuel-Consumption-2005-2015NEW

Barrick's-Liquid-Fuel-Consumption-2005-2015

While Newmont’s fuel consumption fell to 30.4 gallons per oz gold (gal/oz), from its peak of 32.6 gal/oz in 2013, Barrick’s increased to a new record of 34.6 gal/oz.  The combination of the two in 2015 still reached a new record of 32 gal/oz in 2015.

I have to say, acquiring the information for these fuel consumption figures has become quite difficult and frustrating to say the least.  The data for fuel consumption is reported in the companies Sustainability Reports.  The information used to be easier to access a few years ago.  However, several companies are no longer reporting a breakdown in the different energy sources, but rather list it as “Indirect” or “Direct” energy consumption.

I tried to get Goldcorp’s liquid fuel consumption for 2015, but they no longer report that in their materials part of their Sustainability Report.  Instead, they list it as total indirect or direct energy consumption.  Indirect energy is purchased grid electric power, while direct energy would be the diesel to run the massive earth moving machines or other energy sources for generators that provide power for their mining operations.

Furthermore, the companies report their figures in all different metrics.  Some use Gigajoules, while others use Kiloliters or metric tons for example.  So, everything has to be converted to gallons.  To show my readers where I get this data and how I convert it so there are no questions…. look at the images below:

Newmont-2015-Energy-Data-Table

Barrick-Energy-Data-Table-2015

While Newmont burns a lot more diesel to produce their gold, Barrick burns a lot of heavy fuel oil.  A percentage of Barrick’s heavy fuel oil consumption is used to power generators that supply electricity to operations that may be too remote to be able to tie into the country’s electric grid.

Here are the energy conversions for Barrick and Newmont:

Barrick-Energy-Gigajoule-Conversion

Newmont-Energy-Gigajoule-Converstion

To put  into perspective the change in fuel consumption per ounce of gold produced by these two companies since 2005, here is the following chart:

Top-2-Companies-Fuel-Consumption

In 2005, Barrick and Newmont burned an average of 17.2 gallons of fuel to produce one gold coin.  However, it took the burning of 32 gallons of fuel to produce one gold coin in 2015.  Thus, in ten years… these top two mining companies burned an extra 15 gallons of fuel (86% increase) to produce the same ounce of gold that they did in 2005.

The reasons for the increase in fuel consumption at these two mines (as well as the industry as a whole), are falling ore grades and the deepening of the open pit.  As ore grades decline, it takes more ore to produce the same gold.  Thus, more ore has to be extracted and transported by the massive haul trucks.  Furthermore, as the open pit gold mines deepen with age, the haul trucks have to move longer distances (and elevations) to bring the ore to the processing plants.

These mining companies were able to burn 86% more fuel to produce an ounce of gold because the world has brought on more expensive liquid energy supplies.  Unfortunately, this will not continue for much longer as the massive amount of debt in the system will likely cause a systemic collapse of the global financial system.

As U.S. and global oil production declines, so will gold production.  That being said, world gold production may stay elevated even with peak oil.  Why?  Because, when the price of the yellow metal heads back up to the $2,000 level (or higher), the mining companies would be able to bring present uneconomic deposits online… thus adding more overall supply.

Investors need to realize the overwhelming cost to produce gold is energy.  When I say energy, I mean IN ALL FORMS & IN ALL STAGES. I will be discussing this more in detail in future articles and interviews.  However, the raw energy that takes up 20-25% of the total cost to produce gold is only ONE FORM OF ENERGY.  Human Labor consumes an even larger percentage of a gold mining company’s cost.  And we must remember, human labor is a form of ENERGY…. it’s human energy.

Regardless, the mining companies will finally reach a point where they will not be able to access the liquid energy they need to grow their gold production.  Ironically, this will likely come at a time when the global financial system disintegrates, thus pushing the gold price up to much higher levels.

DEFLATION is coming…. just not in the price of gold and silver.

STAY TUNED for the SRSrocco Report Precious Metals Webinar On July 20th

I want all my readers to know about the upcoming SRSrocco Report Precious Metals Webinar on July 20th.  I will provide contact information for those who would like to send questions in which we will answer in the second part of the webinar.

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houtskool
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houtskool

Coal consumption is down in China, as soon as there’s a downturn in consumption of energy, monetary and economic problems arise. Look at Japan, they have to import almost all of their energy, the situation has gotten worse after they closed down all their 52 nuclear plants due to the Fuku disaster. Growth is over, and the financial system, addicted to perpetual growth as it is, will implode because there’s no affordable energy. The amount of currency people need for energy consumption rises, so there’s less currency left to buy the economic output of the system. The same thing can… Read more »

Schnook
Guest
Schnook

“Growth is over” – Parroting Agenda 21 propaganda. Growth isn’t over; it’s over for some parts of some economies. Unfortunately, central planners never willingly get the hell out of the way and let markets work, always exacerbating problems and making symptoms worse.

joey
Guest
joey

This will reduce with oncoming technology. Recently a miner here in Australia pioneered geothermal energy to power cooling units saving them 20%

The world is evolving into other than fossil fuel energy. Question is will we have the time?

Girish Vinod
Guest
Girish Vinod

Very good information not available anywhere else.But at about $2 per Gallon, fuel cost will be $60 per ounce and even at current prices it will be less that 5%.
Secondly the solar energy is getting cheaper by day and hence this will keep overall energy cost in check.
Due to low prices due toprice suppression most of the high grade ore is used up and mines are down to lower grade ores increasing production cost. Hence in future if there is any attempt for price supression it willresult in fall in production very quickly.

petedivine
Guest
petedivine

Solar energy is heavily dependent on Silver. You’re talking about the snake eating its tail. No silver..no solar. Steve also shared with us how much solar was being adopted in the U.S. https://srsroccoreport.com/u-s-wind-solar-production-just-how-little-is-it/ “Total solar and wind production of 2.16 Quad Btu in 2014 was 2.4% of all U.S. energy production compared to 69.2 Quad Btu’s of fossil fuel production which accounted for nearly 80%. In addition, solar and wind were only 22% of total U.S. renewable energy production.” Want to know what this means for U.S. society? It means we’re screwed and there is going to be a big… Read more »

Charley Z
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Charley Z

1) The powering of cooling units is a very small part of the total energy required. As Steve so thoroughly states, to produce each ounce, energy needed to move the greater amount of ore and raise it from lower depths, is the largest part of the total energy requirement. 2) Oil is presently priced in U.S. dollars per barrel. That puts the price of a gallon of crude oil at below $1.00. Refining it and transporting that gallon adds to the cost, but I doubt it would add $1.00. While I see it as likely that the price of oil… Read more »

Michael Smith
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Michael Smith

thanks for what you do, it helps to put things into focus.
lakemike

Mark
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Mark

Steve, Just heard a good update interview with Art Berman on oil/natural gas and he quotes: “What we are going to have — and I don’t want to create any sort of sensationalistic fears or anything, but I’ve got to tell the truth — the truth is that we are going to see an absolute moon-shot in terms of oil prices sometime sooner than later, I think — let’s just say in the next five years. And I shudder to imagine the devastating impact that will have on the global economy. It’s going to be paralyzing.” If he’s correct then… Read more »

OutLookingIn
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OutLookingIn

“coming moonshot oil prices” As with all things fiat based, valuations are relative. To what you may ask? To the instrument that is used to base that value in. $$$$$$ All rising values have an inverse relationship with the valuation marker. Its not that oil, or for that matter gold, silver, nutmeg, etc. are more “valuable” its that the valuation yardstick has lost value. The market based price discovery mechanism has been broken for years. Possibly irreparably so. Until this vital function of market economics is restored, we will continue to have these violent fluctuations of fiat based values. At… Read more »

Barry
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Barry

I would add that the energy to refine the silver and to produce a finished product of bars / coins also takes energy. Refining in particular because there are fewer grams per ton of ore.

Bogwood
Guest
Bogwood

so stop mining gold. There is enough above ground. What a waste. One of the most bizarre elements of the economy. Wasting energy on an element for which there is already hundreds of years of supply.

David
Guest
David

Well…gold is the “gold standard” for money throughout thousands of years.

And in time a gram, ounce, etc. will be saleable or trade-able for an increasingly large number of fiat currency units.

Mankind will destroy the local environment; even kill for gold. But they have done the same to get or produce food and other things people really need.