The big worry faced by any investor in a mining company is reserve depletion. When the ore is all extracted, it’s the end of the road for shareholders, unless new reserves can be found.
A new report from Metals Economics Group, the mining research outfit based in Halifax, suggests investors in the gold mining industry should be concerned that their prime asset – metal in the ground – is being depleted.
The firm looked at all the significant gold discoveries (defined as deposits containing at least two million ounces) made from 1997 to 2011, and tallied up what miners have found, compared with what they hauled out of the ground during the same period. It isn’t a pretty picture for long term sustainability. There were 99 big discoveries containing a total of 743 million ounces. MEG estimates the discoveries only replaced 56 per cent of the estimated gold mined.
MEG isn’t worried that the world will run out of gold any time soon. The problem for the industry is that it is replacing current, high grade mines in stable locations, for development projects comprising of low-grade, riskier deposits. Long term, this isn’t a good thing for the industry.
Link to the article: HERE