The supply of gold has not kept pace with the rising gold price, said Barrick Gold CEO Jamie Sokalsky at the LBMA investment conference in Hong Kong yesterday.
"There were three discoveries last year, compared with 11 in 1991, and none of those can be described as "supergiant," or holding more than 20 million ounces."
Although gold mine supply has increased from approximately 78 million ounces in 2008 to about 90 million ounces in 2011, this is only marginally better than the 85 million ounces produced in 2001 when the gold price was under $300/ounce. New discoveries and large development projects have not kept pace with production declines in mature areas, which is a result of the lack of new discoveries.
According to Sokalsky, discovery rates are continually decreasing at the same time as development time and technical risk are up. The discovery of "supergiants" which majors like Barrick depend on for continued growth are becoming very rare.
Gold exploration spending increased exponentially from about $1 billion $8 billion in the last ten years, but the resulting discovery trend is clearly declining.
This is yet more evidence that gold will continue to be an excellent investment for the next decade. Mainstream investment analysts are continually gravitating more toward gold and we will continue to see rising gold prices. Junior gold stocks that make discoveries will be fought over by the majors with massive bidding wars. What can we say... Junior gold is the place to be in 2012!
The Junior Gold blog