Next Investors logo grey

Gold Fields CEO: we are facing a global gold shortage

Published 26-AUG-2016 11:09 A.M.


2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

Nick Holland, CEO of South African based gold miner Gold Fields, stunned the audience with his speech at the Australasian Institute of Mining and Metallurgy conference in Brisbane on Monday.

Holland stated that the gold mining industry is not spending enough to sustain itself into the future, with slowed primary gold supply growth hinting that we may be hitting a peak in production along with reduced exploration spend and a virtual halt in new projects.

Holland had studied the mine life of 11 leading gold companies to find that it has been on the decline, dropping from 24 to 17 years.

A research agency report also found that 52% of production mined in 2015 was at above reserve grades, which indicates a deliberate bypassing of lower grade gold ore.

If and when the lower grade ore is mined we will see costs increased as was the case in the early 2000s.

Whilst companies can get away with this when gold prices are high, should a reversal in the commodity be seen they could be caught with their pants down so to speak.

Yet if Holland is correct with his assessments and a shortage of physical gold was to develop we would likely see prices skyrocket in a rather short timeframe.

With an increased gold price, previously unfeasible projects could become justified with the new valuation of the resource, however the transformation process of taking a deposit through to production can take many years.

In fact, the time it takes to find a deposit and bring it to production is increasing:

gold production years

This is mainly due to all the known mined, easy to find and close to surface deposits, and new discoveries becoming harder to come by.

This can be seen in the chart below:

gold discoveries

Holland believes that the industry needs to embrace innovation and newer technologies to deal with grades likely to be lower than those presently mined.

Unless major gold discoveries are made over the next few years the industry may find itself playing catch-up to demand.

Central Banks around the world have been hoarding physical gold in 2016, as has investor demand where the first half of the year saw a 127% increase from the same time during the previous year.

As we reported recently, some of the wealthiest people on the planet are moving their money into gold right now.

It seems that something is brewing behind the scenes in relation to gold.

With gold reaching all-time highs this year in Australian dollars, starting 2016 at $1,450 per ounce to now sit at $1,739 per ounce, we have seen many gold shares outperform with double and even triple figure growth.

One of those being soon to be gold producer Blackham Resources (ASX:BLK) who started the year at $0.23 per share and hit a high of $1.18 per share in August.

Share price movements should not be used as a guide to future hare price movements and any investment decision should not be based solely on this information.

If Holland proves to be correct then it may be just the beginning of even greater times ahead for gold producing companies on the ASX.



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.