In 2016, archaeologists working at a dig site in Bulgaria came across a tiny but significant find. A gold bead measuring about an eighth of an inch in diameter, which scientists believe may be the oldest piece of refined gold jewelry ever discovered, dating back as far as 4600 B.C
This discovery holds significance not just to scientists but to investors as well. Simply put, it means that humans have been mining and refining god for more than 6,600 years. And if that’s true gold investors may wonder. After seven millennia of exploitation, how much gold is left in the world to be discovered, mined, and refined in the future?
How Much Gold Has Been Mined Already?
Industry trade group The World Gold Council estimates that since that first gold bead was smelted humans have mined roughly 190,000 metric tons of gold, roughly 77% of global recoverable reserves. And because gold is practically indestructible most of that mined gold is still here today in the form of jewelry, gold coins, gold bullion (i.e., bars of gold), and electronics. Gold is useful as a conductor that does not tarnish.
Interestingly, most of this gold was only mined in the last half-century. Gold has been considered valuable and has been useful as both jewelry and as gold coins for most of recorded world history which stretches back 7,000 years. And yet, the first 6,800 odd years of that history (through 1835) saw less than 20,000 metric tons of gold produced. It took the California Gold Rush, from 1848 to 1855, to push global historical gold production past 20,000 metric tons. The next century saw a tripling in cumulative global gold production to 60,000 metric tons by the early 1940s, followed by a rapid 50% increase to 90,000 metric tons over the next three decades.
Indeed, about 50% of all the gold ever mined has been mined since 1967, and 80% of gold ever brought above ground was mined since 1910, according to the U.S. Geological Survey. The World Gold Council estimates that remaining reserves worldwide amount to just 30% of what’s been mined already - 54,000 metric tons of gold in sufficient concentrations and buried at sufficiently accessible depths to be mined at a reasonable cost.
Recent global production rates of roughly 3,100 metric tons of gold per year means that in less than 20 years recoverable gold reserves worldwide (or at least those that can be recovered at a reasonable cost) should be depleted.
How Mining Companies Are Affected
As gold reserves get depleted and large-scale new gold deposits get harder to find in the Earth's crust, mining operations production costs have risen over time, which could potentially crimp profitability at the world’s gold miners. In 2004, gold miner Barrick Gold reported an average cost of production of just $300 per ounce of gold it mined. By 2011, this figure had more than doubled to $630 per ounce and it continued rising to $800 an ounce in 2014. Production costs have leveled off since with Barrick Gold reporting a $780 cost of production last year.
The story had been similar to larger gold producer Newmont Mining. Newmont Mining reported gold production costs per ounce of $278 in 2004, jumping to $752 in 2011, then $920 in 2014 but its cost of production has likewise leveled off averaging $922 in 2017. On one hand, this recent plateauing of costs in the coming years may reassure investors that gold production costs don’t have to inexorably rise.
On the other hand, the sharp increase in gold mine production costs over the last 15 years combined with the inescapable math showing how quickly miners are churning through Earth’s remaining recoverable gold reserves, suggests that in years to come, production costs could well begin rising again as the world runs out of unmined gold. As long as gold producers are able to sell an amount of gold on the gold market at prices above their cost of production (i.e., assuming the historical trend of gold pricing at a premium to production costs holds), though this should keep demand for gold high and keep miners digging for large deposits of ground stock.
Will The Market Reach Peak Gold?
Fears that there may not be much-unmined gold left in the world might remind some investors of similar worries about the limited amount of oil on Earth. A little over a decade ago with the price of a barrel of crude rocketing to well over $100 a barrel, analysts at Goldman Sachs came out with their famous prediction that oil prices would surge as high as $200. Earth was rapidly approaching or may even have passed the point of “peak oil production” and as oil-starved consumers - both motorists and industrialists - bid against one another for each of the few gallons of gas remaining, the price of oil could only go up.
Of course, that’s not actually what happened. Oil prices surged then staggered then hovered in the $100 range then plunged. A barrel of crude spent much of 2016 below $40, much of 2017 below $50, and sells for nearly $70 dollars today. Could the same thing happen with gold mining? It depends.
Why The Amount Of Recoverable Gold Could Change Over Time
Part of the reason that peak oil didn’t happen earlier this decade and part of the reason oil prices collapsed in 2014 is that the amount of oil (or gold) in the world isn’t a hard and fast number at all. It fluctuates with technology and with humankind’s inventiveness at finding new ways to exploit the kinds of resources it really wants and with prices. Simply put, the more oil costs the more explorers can afford to spend to find and extract it which makes more oil recoverable increasing reserves.
In the case of oil fracking technology that was first pioneered in the 1940s was refined in the 21st century as a way to unlock previously unexploitable oil deposits. High prices were an incubator for efforts to commercialize fracking and other techniques such as horizontal drilling. When those techniques became commercially viable it opened up several billion barrels of oil that were previously deemed unextractable. Which has led to lower prices today. Could something happen with gold? Perhaps.
Peak gold is the same as peak oil. Where the peak is the moment when the maximum world production is reached and declines from then on, eventually reaching zero production. Unlike oil though gold is not used up in consumption. It is typically stashed away in a vault or worn as jewelry.
Estimates for all the gold in the world mined to date hover around 165,000 metric tons. Some estimates go as high as 1 million tons but most experts would agree that under 200,000 is accurate. World gold supplies are difficult to quantify like most precious metals. That is because gold reserves are not always reported accurately. Over 50% of gold production above ground is used for jewelry which makes it difficult to track. Gold rings, necklaces, and bullion can change hands without any records. About 35% is stored as bullion for investments and reserves. Large holders of gold deposits give misleading numbers regarding their reserves presumably for security reasons.
The United States, Germany, Italy, and France are the world’s largest holders of gold respectively. Each has its share of controversy surrounding its claimed gold deposits. There are conspiracy theories about the amount of gold stored in Fort Knox. Some believe it is empty and the government is just pretending it’s full of gold. Without seeing it for ourselves we’ll just have to accept the disclosed numbers.
To further add uncertainty to global gold production small-scale miners do not typically record their take from their mining activities. This is especially true in third world countries. A lot of gold is mined in this way, primarily placer but hard rock as well. How much gold is left in the ground? In Nevada, in Australia, South Africa? Nobody really knows. The mining industry of all sizes spends its exploration budget to map out potential deposits. They are a long way from mapping the entire earth. The peak gold estimates are based on proven and indicated reserves that are reported by public mining companies.
How Much Gold Is Needed For Mining To Be Viable?
Global gold is a valuable but relatively rare element making up as little as 0.0011 parts per million - or grams per metric ton - of the Earth’s crust and as little as 0.00001 grams per metric ton of seawater. For gold mining to be economically viable using current technology miners need to find gold deposits where gold is concentrated in greater density.
Barrick Gold’s reserves are rated at 1.5 grams per metric ton (grams per ton is referred to as the ore grade). Newmont Mining gets by in their gold mining operations with just 1.14 grams in the amount of gold per metric ton. Finding gold at such high densities is not easy. If a gold mine was a hockey team the forwards would be production piling up ounces like goals on a scoreboard. The costs per ounce are defencemen. Solid, predictable, hardworking but rarely getting the glory from tonnes of gold. While production numbers usually drive the share prices of mining companies it’s cost control that keeps the company with positive earnings. Neglect to control your costs and the whole enterprise can quickly go into the red.
While retail investors are often impressed by high-grade mines that crank out the ounces they should realize that gold mining is like any other business. Revenues must exceed costs. The mining supply of gold costs rose steadily through the 2000s which should have hurt a lot of gold miners. In 2001 when the gold price was just $272 per ounce gold mining companies had cash costs of $176 an ounce giving a 54% margin. However, by 2006 the gold price climbed into the $600 an ounce range and miners were losing money. Fast forward to 2012 when the average cash cost was $719 per ounce - 184% higher than 2006.
Working with the World Gold Council senior gold companies came up with a new standard to measure costs: all-in sustaining costs (AISC). AISC includes not only the direct costs to mine gold (machinery, processing, power, labor, etc.), but G&A expenses, exploration, reclamation, and sustaining capital. It does not include project capital, dividends, taxes, and interest payments.
Even so, AISC considerably tightened gold companies’ margins. Of the seven large gold firms, the average AISC in 2012 was $1,046 an ounce but the gold price was sitting at a very healthy $1,675 at the start of 2013 - yielding an average margin of 60%. However, 2013 was also the year the gold price slid to $1,233 - a drop over $400. At this point, gold miners entered a period of pain in gold production. Many sold assets, cut staff and took billion-dollar write-offs on properties as their stock prices plummeted.
Based on known reserves, estimates suggest that gold mining could reach the point of being economically unsustainable by 2050, though new vein discoveries will likely push that date back somewhat. New technologies may also make it possible to extract some known reserves of precious metals that aren’t currently economical to access, but it is unlikely that large-scale mining will continue past 2075 without either huge mining technology advances or the discovery of currently unknown massive gold deposits.
One factor gold has going for it compared to other non-renewable resources like oil is that it can be recycled. In other words “running out of gold” isn’t really an adequate description of what happens when gold mining stops gold production. Rather, the gold industry will transition from mining gold reserves to recycling, allowing the ground stock of global gold supply to be recirculated.
Thanks to a large amount of gold used in electronics that are widely viewed as disposable, efforts to recycle gold extracted from electronic waste are already well underway. Recycling will have to become considerably more efficient to meet the needs of the global gold market, as a huge amount of gold still ends up in landfills each year.
One aspect of the depletion of gold mines that is very difficult to predict is how it will affect the spot price of gold. If demand continues to rise while available supply stagnates, the basic economic theory of supply and demand would suggest that prices will rise substantially in the future. Because no absolute estimate of how much gold is left for mine exploration in the world exists, it’s impossible to know exactly how long current reserves will last. There are, however, some ways to estimate the timeline along which large deposits of gold production could decline.
One primary concept in this effort is known as “peak gold”. Peak gold is defined as the point at which global gold production reaches its highest historical point. There are debates as to when peak gold will actually occur, but most estimates place it within the next decade. Some people think we have already surpassed this point. After peak gold is reached, the global output of gold will gradually decline until all deposits that are economical to exploit have been extracted.
Although the years immediately following peak gold likely won’t see a dramatic decrease in production, the depletion of major mine sites could cause the output to drop drastically within a few decades. At present extraction rates, some analysts believe that Witwatersrand Basin in South Africa and Nevada in the United States, which is one of the largest gold producers in the world, could run out of accessible gold within 40 years.
New Ways To Mine Gold?
At lower densities. Experts surmise that even at the ultra-diluted levels of average concentration the top four kilometers of Earth’s crust alone contain as much as 122 billion tons of gold (let alone what’s in the seas). This suggests that if new technologies should be developed permitting profitable extraction of gold at lower-than-usual gold densities there could be a lot more gold left in the world - discoverable, mineable, and refinable - than currently seems to be the case.
Gold miners might choose to become gold divers. Recent discoveries of precious metals deposits surrounding thermal vents on the seafloor suggest that prime seabed locations could contain gold deposits at concentrations of as much as 6 grams per metric ton. That is four times as rich as Barrick Gold’s average asset and five times Newmont’s. Should such deposits turn out to be common the rising price of gold bullion combined with the diminishing supply of gold on land could spur on a new gold rush underwater and multiply the amount of gold that (we thought) was left in the world.
Even if all gold reserves on Earth were to be exhausted the world might still not run out of gold. Looking skyward astrophysicist Neil deGrasse Tyson has suggested that individual space rocks making up the Asteroid Belt could literally be loaded with gold. Perhaps as much as a half-ton or more contained in the core of any given asteroid. While Dr. Tyson didn’t go so far as to promise that this would be true of every asteroid in the Belt there are more than 150 million asteroids of more than 100 meters in diameter in the Asteroid Belt to choose from that is Olympic. If even a small portion of those space rocks contain gold it could dwarf the amount of this element readily accessible on Earth’s surface. As gold reserves on Earth dwindle and gold prices on Earth rise this could spur explorers and developers to find new sources of gold out where no miner has gone before.