Major gold discoveries failing to replace production
September 15, 2013 9:03 PM ET
By Jim Lowrey
Gold exploration budgets directed at finding and defining new discoveries — grassroots plus 75% of late-stage — have increased significantly since 1999 and reached an all-time high of more than US$6 billion in 2012, according to "Strategies for Gold Reserves Replacement 2013 — Update," a study recently completed by SNL Metals Economics Group.
As it takes at least three years to define a major discovery (a minimum of 2 million ounces of contained gold), it is too early to judge the success of recent exploration efforts; however, data for 1990-2012 show that the total gold found in major discoveries fell short of replacing global gold production, particularly over the past 15 years.
From 1990-1997, companies' annual discovery-oriented gold exploration budget total more than doubled from US$930 million to almost US$2.2 billion, and the average cost per discovery of the 103 discoveries made during that period was US$94.4 million. From 1998-2002, exploration budgets slumped along with gold prices, and the average cost among the 31 discoveries in the period was US$132.7 million. Driven largely by rising gold prices, exploration budgets increased an average of 31% annually from 2003-2012, with the exception of a dip in 2009. Excluding the past three years to account for underexplored new deposits, the average cost per discovery among the 69 made from 2003-2009 increased to US$202.5 million.
