LAWRIE WILLIAMS: Peak gold according to Ian (Telfer)
In a reported interview with Canada’s Financial Post, Ian Telfer, chairman of Goldcorp and one of the doyens of the industry vented his thoughts on Peak Gold. While we’d agree with his basic premise that we are currently at peak gold – or thereabouts – we might take issue with his assertion that there are now no major gold deposits still to be found. Additionally there are also some very large low grade resources which are yet to be developed – in part because there is currently little or no appetite for generating the finance for the huge costs involved. But this could well change if increasing gold scarcity drives up the metal price and makes their economic viability no longer an issue.
These known yet-to-be-developed mega deposits include Pascua Lama on the Chile/Argentina border, Cerro Casale and Caspiche in the Chilean Andes, KSM and Snowfield in Canada’s British Columbia, Pebble in Alaska and the Wafi-Golpu deposits in Papua New Guinea. There are almost certainly others. With a still substantial part of the global landmass unexplored there has to be a good chance that there will be some additional large scale gold orebodies yet to be found. But the incidence of discovery will likely be slower than in the past and if any are found they are likely to be in increasingly inhospitable areas of the world which will be another hindrance to their development. But they almost certainly are there nonetheless.
But in terms of our effectively having reached peak gold production we would concur with Telfer. He is reported as stating in his interview that “If I could give one sentence about the gold mining business … it’s that in my life, gold produced from mines has gone up pretty steadily for 40 years. - Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down. We’re right at peak gold here”
Given what we see as the inevitability of flat, or declining, gold production from now on, the recent performance of the gold price in being pushed down below the psychological $1,300 level is a little hard to explain without attributing it to at least a degree of suppression/manipulation by those scared of the implications of a runaway gold price. But we suspect such pressure can only be of limited duration and we’d stick to our forecast of gold reaching $1,400-$1,450 this year.
Some very credible analysts are suggesting even higher levels will be achieved in 2018. But then the past few years are littered with such failed predictions. The gold price is anything but predictable. Always has been and probably always will be.
The current price malaise is largely put as a reaction to a ‘stronger’ dollar index, but as we pointed out in an earlier article dollar strength and gold price weakness can be attributed to two sides of the same manipulation coin. A runaway gold price can be taken as a reaction to a weak economy, as can a falling currency parity, and politicians and central bankers in the nations that matter do not want to be seen as presiding over a declining economy. But there’s little doubt that supposed real economic growth is mostly illusory at the moment and countries are happy to manipulate exchange rates to disguise the real problems. Gold can show them up – and over time will!
17 May 2018