Miners cut exploration funding after bullion’s rocky recovery
“For the first time in history, gold supply into the future is under enormous pressure.” The warning from Mark Bristow, chief executive of London-listed Randgold, encapsulates the gold mining sector’s woes.
Bullion’s only modest price recovery this year compared with other commodities has led the industry to cut spending on exploration dramatically to less than $4bn from almost $10bn in 2012. Petropavlovsk, a gold miner with assets in Russia, is a case in point. It has cut its exploration budget by two-thirds.
“There is a chronic shortage of exploration money and as usual the gold price is not acting in the way everyone thought it would do,” says Peter Hambro, chairman of the company. This backdrop has left many in the industry forecasting a supply shortage by the end of the decade.
Mr Bristow believes this supply shortage will be inevitable unless some major discoveries of large, high-grade ore bodies are suddenly made. “Which frankly seems a remote possibility.”
Across the world, miners have instead spent their cash expanding existing deposits, improving efficiency or cautiously looking at acquisitions. Canada’s Barrick Gold, which also does not expect to increase its total production of gold over the next four years, is in the process of selling its noncore assets.
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