Gold-mining industry: current state and perspectives for development
Deposits of gold are found in 117 countries of the world but the main reserves are accumulated in the Republic of South Africa (RSA), Australia, Canada, Russia, Indonesia and Uzbekistan.
In 2016 the total world gold extraction was more than 3100 t, with China as the global gold extraction leader. In 2016 more than 455t of gold were extracted in China. The next leading nations are: Australia (270t), Russia (250t), the USA (209t).
In the 1970’s, RSA was the world leader in gold mining with the amount of extraction exceeding 1000t/year and constituting 80% of the total world extraction. Nowadays its share constitutes only 4.6% and continues to decrease. In 2016 only 140 t of gold were extracted in RSA. However, in RSA there is a strong trend of increasing salaries (now up to 45% of gold resource exploitation costs are salary costs). Moreover, a demanding new tax system combined with steadily decreasing yield of remaining deposits, as well as an increase of the required operating depth, have all caused a difficult economical situation for the gold mining industry in RSA.
Amounts of reserves and of extraction referred hereinafter can be not exactly reported because exact calculation of extracted gold isn’t performed in all the countries. In particular, the following refers to small gold-mining companies as well as total calculation of reserves in a country on the whole. Some countries such as the USSR and China didn’t give any information or gave incomplete information.
According to the data of the Geological Survey of the USA in 2016 the total amount of gold extracted in the world was 3100 t.
Total global gold extraction
(according to the data of Mr. Verkhozin S.,on the basis of the data of the US Geological Survey)
Trends in gold extraction of leading gold-mining countries
(Shavrova M., 2016)
Thus, we can see that the amount of gold extraction is increasing in China, Mexico, Russia and Uzbekistan. The amount of gold extraction is decreasing in Indonesia, the USA, and RSA.
On the whole, development in the gold-mining industry occurs in cycles. The total world amount of extracted gold doesn’t tend to vary significantly year-to-year. However, taking into consideration the substantial increase in Chinese gold extraction seen in the last few years, experts are increasingly certain of a significant rise in the trajectory of annual global gold extraction in the near future.
Only 2% of annual gold extraction comes from placer gold deposits. Gold-bearing placers are gradually losing their importance in the majority of gold-mining countries. They are still commercially viable only in Russia (app. 30% of the total gold extraction in Russia), in China and in some countries of South America.
More than half of gold extracted annualy in the world comes from mines operated by the 20 largest gold-mining companies, including Russian company PAO “Polyus”.
The world’s largest gold mining companies
( GFMS, Thomson Reuters)
The global level of gold extraction heavily depends on the price of gold and the magnitude of extraction costs. If the gold price increases, the reserves which were previously considered unprofitable become economically viable and the amount of extracted gold increases.
Dynamics of average annual prices for gold in London
(cash market), USD for troy oz
Before 1971, the USA gold standard was a limiting factor for the development of the global gold-mining industry. At that time the absolute leader was RSA with 80% of the total amount of global gold extraction, equal to 1000t of gold every year.In the years following the repeal of the American gold standard in 1971, a free gold market was created, leading to an increased amount of gold extraction in several other countries.
Starting in 1990, developing countries with promising gold reserves saw a substantial amount of foreign investment.
At that time these countries were characterized by newfound political and economic stability as well as new legislative systems which incentivized extraction of mineral resources. For many such countries, gold still constitutes a considerable share of exports: Ghana – 32%, Mali – 59%, Tanzania – 44%, Papua-New Guinea – 36%, Mongolia – 20%, Kyrgyzstan – 45% .
Starting in 2002, dubbed “the year of gold” by some analysts, the gold price saw an explosive uptrend with minor fluctuations: the average monthly price for an ounce of gold on the London market rose from $281.51 USD in January up to $332.61 USD in December(a total gain of 15,4 %). That year’s average annual price was $310 USD, 14.4% higher than it was in 2001. The fundamental factors which influenced this price hike include the post-DotCom American economic recession and an increase in global political instability following the September 11, 2001 terrorist attacks.
In 2012, the average annual gold price reached its peak – $1684 USD/oz. This price spike was explained primarily by a great demand for gold from retail investors.
On the whole, development in the gold-mining industry occurs in cycles. The total level of global gold extraction doesn’t appreciably change year-to-year. However, taking into consideration the substantial increase in Chinese gold extraction seen in the last few years, experts are confidently predicting a significant increase in the annual amount of gold extracted globally in the coming years.
In the current practices of the global mining industry, development of gold ore deposits with gold content between 5-12 gr/t is considered profitable, assuming it is possible to use low-cost technologies (heap leaching) for processing of poor ores.
The use of heap leaching technology allows a high speed of development of Carlin-type gold deposits, as are present in the USA. This specific type of deposit has allowed a high rate of growth in the US mining industry. The amount of gold extracted there still constitutes more than 200t/year. Two-thirds of this gold is extracted in Nevada.
Development of some Siberian gold deposits with poor ores can have only remote long-term prospects. The state of old and active mines is unfavorable. In the largest mines there, the work is performed at depths more than 400-500m (Berezovsky gold mine, Darasunsky gold mine, Sovetsky gold mine), and the content of gold in those ore bodies is rarely higher than 5gr/t.
Structure of global gold reserves.
The largest amount of reserves (42,1%) is accumulated in metamorphic deposits of uranium-gold-bearing conglomerates(Witwatersrand in RSA, Tarkwa in Ghana,Jacobina in Brazil).
The reserves of epithermal gold-silver and gold-telluride deposits are considered as the most valuable (10.5% of the total world reserves). They are connected with volcano-tectonic structures (Lihir, Porgera in Papua-New Guinea, Round-Mountain in the USA, Mnogovershinnoe in Russia and others).
Next, 7,2% of the total world reserves are in a group of deposits laid in ancient greenstone belts (Kalgoorlie in Australia, Porcupine and Hemlo in Canada, Kolar in India and others).
Following that, 6,3% of the total world reserves consists of a group of deposits belonging to the type of stringer-porphyry hydro-thermal deposits laid in terrigenous carbonic formations (Homestake in the USA, Muruntau in Uzbekistan, Ashanti in Ghana, Sukhoy Log, Nezhdanninskoe in Russia and others).
4,7% of the gold reserves occur in the Carlin-type stratified deposits which are laid in terrigenous - carbon formations.
12,6% are found in gold-bearing ores in complex deposits of other metals, mainly in porphyry-copper ores.
Gold-bearing placers contain about 5% of the total world gold reserves.
11,6% are formed by secondary gold-ore deposits. Among them, a growing proportion of gold-bearing crusts of weathering is noted.
The largest deposits (more than 100 t of gold) constitute 10% of the total number of world gold deposits. They contain more than 80% of the world gold resources. The largest 1% of gold deposits, super-giant deposits, have reserves in excess of 1200t. They contain 57% of the world gold deposits. [http://www.infomine.ru]
Global gold consumption:
- jewelry business — about half of all the extracted gold is used for jewelry production;
- assets of big banks — some fraction of large banking institutions’ reserves are held in gold bars;
- industry — for electronics, prosthetic dentistry, equipment of space ships, etc.;
- investment — a constant rise in price of gold makes it a very profitable long-term investment.
Demand for gold in the world for 10 years, from 2005 to 2015
The countries which consume the majority of gold can be precisely divided into two groups. On the one hand is a group of technologically-developed countries. Such countries widely use gold in different areas of technology and in various branches of industry as well as for jewelry production. The following countries are leaders in gold usage for technical aims: Japan, the USA, Germany. In these countries gold can be considered as an indicator of high-tech development in digital and electro-technical industries, as well as in the space industry, the instrumentation manufacturing industry, etc.
One the other hand there is a group of countries where the main share of gold or even the total amount of extracted gold is used only for jewelry production. They are the following countries: in Europe - Italy, Portugal; in Asia - China, India, Indonesia and Malaysia; in Middle East, Asia Minor, and in North Africa- Arabian Emirates, Israel, Kuwait, Egypt.
Current state and perspectives of gold-mining industry development
Today, Russia is second place in the world after RSA for gold reserves and in third place after China and Australia for the amount of gold extracted annualy. More than 14.5 thous. tons of gold are registered by the State Register of reserves. Almost 72% of these resources have been allocated to mining companies.
About 67% of prospected reserves are contained in gold-ore deposits, and about 25% of prospected reserves are found in complex deposits. The share of gold placers in the total amount of reserves still exceeds the average world level and constitutes a little more than 8%. But quantity of gold placer deposits is constantly decreasing.
Mineral resource base of gold in Russia (according to data from the Central Research Institute for Geological Exploration of Non-Ferrous and Precious Metals)
Excluding Sukhoy Log gold deposit reserves from calculations (calculation with the Sukhoy Log gold deposit reserves: А+В+С1 = 88,5%; С2 = 88,9%; А+В+С1+С2 = 88,7%)
The Russian Federation’s mineral resource base consists of prospected reserves in the Siberian Federal district (42,2%), Far Eastern Federal district (40,4%), Privolzhsky Federal district (11,3%), Uralsky Federal district (4,9%), Northern – WesternFederal district (0,7%) and Northern- Caucasian Federal district (0,5%).
These gold deposits are mostly situated in regions with poorly developed infrastructure. The costs for industrial development of gold-bearing deposits in such areas are much larger than they are in certain foreign countries. The majority of extraction is performed in 24 administrative districts of the Russian Federation.
Regions of gold extraction in Russia
- 1. The Krasnoyarsk area 2. The Chukotsky Autonomous district 3.TheAmursky region 4. The Magadan region 5. TheRepublic of Sakha (Yakutia) 6. The Irkutsk region7. The Khabarovsk area 8. The Zabaikalsky area 9. The Sverdlovsk region 10. The Republic of Buryatia 11. The Chelyabinsk region 12. The Kamchatsky area 13. The Republic of Khakassia 14. The Republic of Tyva 15. The Kemerov region 16. The Altay area 17. The Novosibirsk region 18. The Republic of Altai 19. The Republic of Bashkortastan 20. The Primorsky area 21. TheSakhalin region 22. The Khanty-Mansyisky Autonomous district 23. ThePermsky area 24. The JewishAutonomous region
Dynamics of gold extraction and of gold production
in Russia in 1991-2015
(from the presentation of the Union of Russian Gold Producers, 2016)
Considering the current rates of mineral deposit exploration, combined with annual extraction of more than 250t, the Central Research Institute for Geological Exploration of Non-Ferrous and Precious Metals forecasts that the amount of gold production in Russia will tend to decrease beginning in 2020 and may fall by as much as half over the long term.
As a consequence of history, the Russian state is responsible for preparation of promising areas for prospecting and exploration of mineral resources. Private investors only perform prospecting and exploration on already-discovered promising areas. In state or private companies, the main share of costs is related to geological study of precious metal ore mineralization.
Structure of costs for mining exploration projects in 2017 (according to Rosnedra data)
Federal budget funds – 5.2 bln.RUBMining companies’ funds – 48.4 bln.RUB (plan)
In recent years there has been a constant reduction in the financing of geological-exploration using Federal budget funds. It is caused by existing financial difficulties in Russia.
Directions and financing of geological-exploration
paid for by Federal budget funds in 2018
(according to Rosnedra data)
The consequences of such short-sighted policy are visible even now. Exploration and development of new deposits are occurring more slowly than extraction of mineral resources from the subsoils. Thus, in 2017 the increase in explored gold lode deposit reserves constituted only 83% of the amount extracted, and the increase in reserves of placer gold constituted 28%. Therefore partial depletion and/or full depletion of gold reserves in some gold-mining regions can be expected in the next few decades (for placer gold it may happen much earlier).
The following two factors shouldn’t be neglected:
1) the economy of Russia and its prosperity are based primarily on mineral raw material resources;
2) the timeline of developing a promising area beginning from its discovery up to starting extraction of gold from a lode deposit constitute no less than 15-20 years.
That’s why it is necessary to act in the interest of Russia’s future prosperity right now. The State financing of mining exploration projects should be substantially increased in order to avoid forthcoming crisis events.
The level of existing gold reserves compared to the level of annual extraction is an issue of a serious concern because this ratio is approaching a critical point for any gold-mining company. In conditions of a real increase and an expected growth of extraction up to 350 t of gold/year, the lifetime of existing gold reserves doesn’t exceed 20 years even if the potential of predicted resources is included.
Therefore, in 15-20 years, instead of a potential increase of gold production, Russia’s gold-mining industry will face the opposite situation. The cause of this situation is the state’s lack of attention to technical aspects, as well as the unreasonable reduction of lode deposit exploration, which no longer keeps pace with extraction.
Necessary amount of financing for early-stage gold exploration projects up to 2020, in order to amass sufficient reserves for gold production on the basis of 300t annually, in mln.RUB (according to Rosnedra)
At the end of 2016, in order to compensate for a lack of growth in economically viable mineral reserves, the Ministry of Nature of Russia issued an order. According to this order it is now permissible to allow mining companies the use of subsoil in areas for which there is no official data about presence of mineral reserves.Such areas won’t be included into official registers of deposits which are proposed for geological study at the expense of mining companies’ funds. The most popular areas were the promising areas for placer gold extraction.
According to information from Rosnedra, after this order of the “declarative principle”came into force, more than 1000 subsoil areas were allocated for geological study. This process will provide growth in financing of mineral exploration projects for at least 3 years. In 2017 the increase in placer gold reserves in the subsoil areas where the licenses were received on the basis of the “declarative principle”constituted 1.81t (11 objects in the Amursky region, the Irkutsk region and the Kemerov region, in the Khabarovsk area, in the Republic of Buryatia, the Republic of Tyva and the Republic of Khakassia). The increase in lode gold reserves constituted 1.607t (1 object in the Sverdlovsk region).
According to the data of the XVII congress of Artisan miners of Russia, reserves of placer gold constitute about 900t in Russia. No less than 3 thous.t can be found in technogeniс placers. Annual extraction constitutes about 70t. The following steps were proposed for realization of gold extraction from technogenic placers:
- to legally recognize a concept of “technogenic placers”;
- to provide technogenic placers and areas to mining companies without
- to allow to mining companies to extract precious metals from technogenic
auctions or competitions, i.e. to use the “declarative principle”, with applications of companies being considered by local commissions with participation of Rosnedra representatives and representatives of the state executive authorities;
placers in the limits of a provided mining allotment without geological study of subsoils;
- to cancel the requirement of performing state expert investigations of technogenic reserves.
Another source of placer gold could be its secondary extraction while excavating building sands, via application of the “wet cleaning” magnetic separation technology. Unfortunately, the current legislation doesn’t allow conducting such works without getting an appropriate license, and extraction itself cannot be performed without confirmed reserves and approved development projects.
The whole process becomes more difficult because general mineral resources are governed by the local state authorities but gold resources are governed by the federal state authorities.
Another method of gold extraction can be searching for nuggets in the already-worked areas of placer gold deposits. Of course, the amount of gold found this way will be minimal. But in any case, for such extraction a “voluntary disclosure” method must be firstly legalized.
It is necessary to reconsider the government’s “Strategy of development the Russian Federation’s mineral resource base till 2030” and to continue financing of mineral exploration projects using federal budget funds after 2020.
In the very near future it is necessary to increase considerably the federal budget financing of prospecting works.
It is necessary to change some legal and state standard documents to allow mining companies to perform gold extraction from small placer gold objects and from technogenic placers without registering these reserves in the State Register of Reserves, but only on the basis of an approved development project.
It is necessary to permit a “voluntary disclosure” method for searching nuggets by private persons on the already-exploited sites of placer gold deposits without performing mining works.
It is necessary to continue perfecting methods of exploration, extraction and refining of gold as well as to continue implementation of modern geophysical logging technologies, and to perfect methods of more effective extraction of fine gold in the placer gold-mining industry.