There is discussion that the world is running out of large-scale gold deposits because the last 10 years have seen a significant decline in major high-grade gold discoveries. This is leading to great concern that the gold shortage will affect gold enthusiasts and limit new opportunities for investors.
Various analyses have shown that the discovery of gold mines has declined over the past 30 years, even as the industry invests heavily in exploration. Industry experts and magnates have predicted a perpetual decline in gold production from its current peak.
Even though there are still gold projects to be developed, the lack of discovery of significant new deposits is an indication that the portfolio of projects with large and high-quality assets are not sufficient to replace the old gold mines. The lack of major new discoveries is a consequence of the centralization of exploration on known deposits, which is occurring as the sector shifts away from high-risk exploration to projects to existing properties with already discovered properties.
Falling prices in the past year have led gold companies to cut costs as much as possible and investors to focus more on macroeconomic factors rather than on the number of ounces produced. This has caused companies to ramp up production and put gold quality on the back burner in order to focus more on boosting profits.
With that said, there are still opportunities where investors can participate in potentially high-grade, large new discoveries. One of the companies advancing two gold exploration projects in Colombia is Collective Mining (TSXV:CNL). The company was founded by the team formerly of Continental Gold, responsible for the discovery, licensing and construction of Colombia’s largest gold mine.
Collective Mining recently announced it had encountered large visual zones of mineralization at its Apollo target in its first two diamond drill holes. Assay results are pending, so investors may have potential catalysts in the stock as results come to market over the coming weeks. Management appears quite confident in this target as they are busy building new drilling pads and deploying a second rig to the area.
The Company seems to have a knack for quick success at the exploration level as it has three grassroots discoveries already, in less than 12 months of drilling. Recently, the Company announced a discovery hole at its Olympus Central target consisting of 302 metres @ 1.11 g/t gold equivalent. The discovery at Olympus Central has focused the Company’s efforts toward expanding the discovery while widening plans to test several more of its 12 total targets.
Ari Sussman, Executive Chairman of Collective Mining, commented in a recent press release: “Over the course of the past year, Collective has drilled five grassroots generated targets and made three significant new discoveries, two of which are at the Guayabales project and one at the San Antonio project. In my career, I have never been involved in projects as prospective as our current portfolio. We plan on remaining aggressive for the balance of 2022 and will focus on expanding the mineralization at Olympus Central, where we recently drilled the discovery hole yielding 302 metres from near surface at 1.11 g/t gold equivalent.”
Meanwhile, mining companies around the world are struggling to discover new deposits to balance and recover lost production. Fortunately, the world’s largest mining companies have been entering into merger agreements to combat low returns and declining reserves. “Given the long time it takes to explore, discover, delineate, permit, finance and build a new mine, merger and acquisition is a much faster way to replace reserves,” said Ryan Hanley, an analyst at Laurentian Bank Securities.
While gold reserves are dwindling, companies struggling and investing in the discovery of new deposits are increasing by the day. Analysts blame the shortage on low profit margin and claim that a minimum price of $1,500 per ounce is needed to maintain current production at an economically viable level.
One of the most obvious problems that have caused the lack of new discoveries is the decrease in global exploration budgets for non-ferrous metals. Gold prices are expected to increase with mine expansion and technological advancement driving mining companies to explore for new gold deposits. Additional grassroot exploration is needed to ensure asset quality to replace aging mines. Mining companies must now be willing to take greater risks and explore new frontiers.
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