> Further, even they are mining out the juiciest part of their reserves right now
Check out their annual reports and you will see the average ore grades of the mines have remained relatively constant over the last four years. It is rather hard for a heap leach mine (ABX/NEM/PDG) to high grade like an underground mine can do (like Homestake, Hemlo area mines, etc..)
> My point is that sure there are some low cost deposits being produced, but it's a small percentage of overall mine production
Some of these "tiny" mines are almost big enough to be in the Top 15 as stand-alone companies. Pierina produces 837,407 ounces at $42, Cortez 797,115 @ $48 Meikle 977,356 @ $75. Entire companies would love to get into the million ounce club, and these individual mines are almost there !
> that can't be replaced cheaply because of the exploration dearth
The big firms are having no problem replacing all of the reserves they mine, and even adding to them. ABX is moving Pascua resources into the reserve category, and Placer still has a lot of ounces at Getchell.
No one believed me when I said world primary mine production would set a record in 1999 despite lower prices but it did, and it looks like it is going to happen again in 2000. There is a lot of profitable mineable gold available in the world.
Unfortunately, only about a dozen companies have the resources to do it properly. I feel sorry for the high cost, low volume producers, but natural selection tells me they either better get bigger to function in the new reality of the gold mining business or go out of business. Bob Buchan (Kinross) had it right when he said you need to be a 1+ million ounce producer to be viable, and I think he recently changed it to 2 million ounces.
Gold mining is a tough business even in the best of times. |
