Mining Exec: We’ve Found All the Gold

Mining Exec: We’ve Found All the Gold from Schiff Gold

The head of one of the world’s largest gold mining companies says we’ve found all the gold.

Ian Telfer serves as the chairman of Goldcorp Inc., a worldwide gold mining company based in Canada. During an interview with the Financial Post, he said the world has reached “peak gold,” meaning as we move into the future, mine production will decline steadily.

If I could give one sentence about the gold mining business … it’s that in my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down. We’re right at peak gold here.” 

Goldcorp’s production has fallen from a peak in 2015 when the company produced 3.4 million ounces of gold. In 2016, production tailed off to 2.8 million ounces and dropped again in 2017 to 2.5 million. Other industry big boys, including Barrick Gold Corp. and Newmont Mining Corp., have also experienced drops in production.

Telfer offered a simple explanation for falling gold production. We’ve found it all.

Are we not looking for it? Are we bad at finding it? Or have we found it all? My answer is we found it all. At US$1,300 (per ounce of) gold, we found it all. I don’t think there are any more mines out there, or nothing significant. And the exploration records indicate that.”

Telfer also said the average grade of new gold deposits — meaning the amount of gold per volume of earth extracted — is declining.

The Goldcorp CEO said that with the prospect of declining supply he’s “very bullish on the price of gold.”

Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s.

Telfer is not the first person to suggest peak gold is upon us. During the Denver Gold Forum last September, World Gold Council chairman Randall Oliphant said he thinks the world may have already reached that point. Franco-Nevada chairman Pierre Lassonde also expects a significant dip in gold production in the coming years. During an interview with the German financial newspaper Finanz und Wirtschaft last fall, Lassonde said we’re seeing a significant slowdown in the number of large deposits being discovered. And in 2016, Mining.com analyzed the data and concluded there are no more easy gold discoveries.

Mine output over the last few years supports this notion. Gold production plateaued in 2017, rising just 5.7 tons according to the World Gold Council. That represented the smallest increase since 2008.  Meanwhile, Chinese mine production dropped by a record 9% in last year. The only other time output has fallen in China was 1980. The country accounts for 15% of the world’s total gold production. Early this year, a study came out saying  South Africa could run out of gold within four decades. Analysts say that at current production levels, the world’s fifth largest gold producer has only 39 years of accessible gold reserves remaining.

When we look at the future of gold, it’s easy to get caught up in the latest geopolitical turmoil or the most recent policy pronouncement by the Federal Reserve. Of course, these events in the news cycle are important. But investors should never lose sight of the most basic fundamentals – supply and demand. The gold industry may well be entering a long-term — and possibly irreversible — period of less available gold. As mining companies find it more difficult to pull gold out of the earth, it will mean less gold for refiners to produce for the consumer market. Remember, gold gets its value from its scarcity.

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.