The gold industry is in need of more high-quality deposits, Pierre Lassonde, chairman of Franco-Nevada (TSX:FNV,NYSE:FNV), told industry professionals at AME BC's Mineral Exploration Roundup. He reminded them that fulfilling this need is their job and asserted that the industry is falling short because miners have not invested in new technology. He believes that challenging years lie ahead if companies continue along this path.
The message Lassonde delivered last week in Vancouver is not new. He has issued this call to action before,
at the Denver Gold Forum, an event he sees as one of the most important for the industry.
Perhaps miners will take this consistency as an indication of how critical Lassonde believes the situation to be. He insisted that miners' lack of innovation is — and will continue to be — a major problem for the gold industry.
Lassonde did not shy away from using history to point out gold miners' shortcomings. Recalling gold's bull run in the 1970s, he said prices rose from $35 to $800. And though it took the industry seven years to respond, when it did, production more than doubled.
People debate why gold equities are so drastically underperforming bullion prices during this bull run, which has lasted for a decade. Exploration and development spending have soared, yet the industry lacks a discovery record that reflects these conditions.
Gold miners have spent enormous sums of money on low-quality projects. Cutoff grades in some cases are now as low as 1 gram per metric ton. “The next cutoff is dirt,” MINING.com quoted Lassonde as saying.
He also pointed out that many projects are in risky, undeveloped countries, which contributes to rising costs. Furthermore, moving projects to production once took about three to five years. It now takes 10 to 15 years, and Lassonde believes that time frame is eroding value.