Yellow metal industry faces mine discovery challenge



Singapore: Gold discovery rates are decreasing even as exploration spending in the industry reached a record $8 billion last year, according to Jamie Sokalsky, chief executive of Barrick Gold, the world's largest producer. There were three discoveries last year, compared to 11 in 1991, and none of those can be described as 'supergiant', or holding more than 20 million ounces, Sokalsky said at a conference in Hong Kong. Breakeven costs were rising, he said yesterday, predicting gold's bull market shows no signs of ending.

Gold is poised for a 12th annual gain, driven by increased investor and central-bank purchases as governments around the world boost stimulus to revive their economies. Global gold mine output may increase 0.7 per cent in 2013, the slowest pace since 2008, according to Barclays, which forecasts that total physical supply may shrink 0.4 per cent next year. A further rally may not spur much higher output, he told the conference.

"I don't see a surge in gold production if we saw a gold price of $3,000," Sokalsky said.
"At a higher gold price, we'd still be experiencing the same challenges. I'd suggest there'd be very limited response to that higher gold price."

Gold for immediate delivery, which climbed to a record $1,921.15 an ounce on September 6, 2011, traded at $1,724.30 at 12:11 p.m. in Hong Kong after rising 10 percent this year. The run of annual gains is the best performance since at least 1920.

"It's getting harder to find large deposits and to get those deposits into production takes at least twice as long as it might have taken a decade ago," Sokalsky said yesterday in an interview. "We're not going to see new mines coming in as fast as we thought to replace old mines that are closing."

World gold-mine production may increase to 2,672 metric tonnes next year from an estimated 2,652 tonnes in 2012, according to data from Barclays in a November 8 report. Global scrap supply may decline to 1,636 tonnes from 1,671 tonnes, reducing total supply to 4,308 tonnes in 2013 from 4,323 tonnes, according to Barclays.


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