By Andrey Dashkov, Research Analyst
NEW YORK (
) -- In the mining business, it is said that grade is king. A high-grade project attracts attention and money. High-grade drill intercepts can send an exploration company's stock price higher by an order of magnitude.
As a project moves to the development stage, the higher the grade, the more robust the projected economics of a project. And for a mine in production, the higher the grade, the more technical sins and price fluctuations it can survive.
It is also said that the "low-hanging fruit" of high-grade deposits has all been picked, forcing miners to put lower-grade material into production.
You could call it "Peak Gold" -- and argue that the peak is already behind us. Let's test that claim and give it some context.
One of the ways to look at grades is to compare today's highest-grade gold mines to those from the past. We pulled grade data from the world's ten highest-grade gold mines for the following chart.
As of last year, grades at the richest mines have fallen an average of 20% since 1998. However, except for 2003, when the numbers were influenced by the Natividad gold/silver project (average grade 317.6 g/t Au) and Jerritt Canyon (245.2 g/t Au), the fourteen-year trend is relatively stable and not so steeply declining. The spike in 2003 looks more like an outlier than Peak Gold.
However, these results don't provide much insight into the resource sector as a whole, one reason being that the highest-grade mines have vastly different production profiles.
For example, Natividad -- owned by
Compania Minera Natividad y Anexas
-- produced over one million ounces in 2003 from ore grading over 300 g/t gold, while the San Pablo mine owned by
DynaResource de Mexico
produced only 5,000 ounces of gold from 25 g/t Au ore in the same year.
This made San Pablo one of the world's 10 highest-grade operations in 2003, but its impact on global gold supply was minimal. In short, the group is too diverse to draw any solid conclusions.