Barrick Needs Randgold to Make the Grade – by David Fickling (Bloomberg News – September 24, 2018)

Few gold miners can operate profitably near the metal’s current grade levels. A merger may be the best solution.

Gold miners have been struggling for decades against geological destiny.

The grade of metal in the world’s gold reserves has been declining for years, from average levels above 10 grams a metric ton in the late 1960s to almost one tenth of that now. That’s a worrying metric, because few gold mines can operate profitably below 1 gram a ton – equivalent to extracting two teaspoons of gold from a Statue of Liberty’s-worth of ore.

With gold prices now hovering below $1,200 a troy ounce, that deterioration of the world’s ore quality is becoming particularly acute. From levels of 1.42 grams a ton a decade ago, the average reserve grade of the top five gold miners – Barrick Gold Corp., Newmont Mining Corp., Anglogold Ashanti Holdings Plc, Goldcorp Inc., and Newcrest Mining Ltd. – has fallen to 1.12 grams in 2017, having touched a low of 1.04 five years earlier.

In recent years, Barrick’s Executive Chairman John Thornton, who’s also a Ford Motor Co. director, has taken a carmaker’s approach to this problem: promising to slash operating costs and use data analytics to supercharge the productivity of its pits.

That can only get you so far, though, because the grade of most deposits goes down as miners dig up the best bits. With each ton of rock that’s extracted, it gets harder and harder to make money.

For the rest of this article: