Global Gold Mining Trends

July 10, 2011

By George Simchuk

Over a career spanning four decades, I have been involved in managing numerous gold mining operations throughout North America. Due to perceived instability in the world economy, the price of gold remains at record highs and many increasingly see the precious metal as the ultimate safe investment. Gold’s dramatic price rise began a decade ago, yet since that time production has come down an estimated 6 million ounces per year. One of the world’s most precious minerals, gold is found in many countries in diverse desert, jungle, and mountain environments.

Gold production occurs in numerous countries, such as China, Australia, U.S., Canada, South Africa, Russia, Peru, Uzbekistan, Ghana, Indonesia, Papua New Guinea, and Mexico. Gold production has declined for a number of diverse reasons. Traditional gold powerhouses, such as South Africa, Australia, and the U.S., show a significant decrease in production. These countries face geological challenges: miners have largely depleted higher-grade, non-complex ore near the surface and exploration has not yielded enough new finds to fill the gap. Some developed countries have banned certain types of environmentally destructive mining techniques, which creates another complicating factor. Geopolitical risk factors prominently into mining companies’ unwillingness to explore existing gold opportunities, as well.

For example, Venezuela poses great uncertainty in this area. The country’s iron-fisted management of natural resources, and long tradition of nationalizing foreign-invested assets and operations, has dissuaded major mining companies from setting up operations there. This has occurred despite large known gold deposits and immense prospecting potential. Neighboring Colombia presents a different situation, with similar net effects. The dangers posed by violent rebels and drug cartels have long kept international mining concerns out of the region. Like Venezuela, Colombia possesses the potential to become one of the world’s leading gold producers. Fortunately, the long term outlook is more optimistic: with a stable government these past few years, foreigners invest more, and gold mining operations should start to develop in Colombia. Geopolitical risk extends beyond South America.

Longtime gold production leader South Africa has regional instability and government mismanagement issues to contend with as well. Some areas of the globe, particularly Mexico, China, and Ghana, have populations that are witnessing a boom in gold production. China’s 1997 Mineral Resource Law allowed foreign mining operations. This has given China access to the technical expertise and financial resources to effectively access the nation’s mineral resources. Gold production potential remains, particularly in Russia, a country whose miners have barely tapped exploration possibilities. With the prices of gold steadily climbing, we should see a resurgence in activity in many gold-producing regions of the globe over the next 10 years.

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