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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | Miners will need $3,000 gold price to be profitable, WGC head says This raises the question then, how did they make a profit between 1982-2005 when gold was < 450/oz? Surely mining costs have not gone up three-fold since 2005? If not, then something is wrong with this picture. http://www.reuters.com/article/2012/...8GF0AR20120515 Quote :
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Yellow Jacket Join Date: Nov 2011 Location: Waaay south
Posts: 3,370
Liked: 2046 times | Good stuff there Unobtanium. What a lot of folks do not realize is that gold mines no longer have large veins of pure gold sitting in quartz veins waiting to be exploited. Barring some random discovery of some unknown gold reserve/vein, the quality of gold mines will continue to degrade. As it is, most gold mines are graded in grams of gold recovered per ton of material removed for processing. Again, that's GRAMS of gold per ton. Think about the energy requirements for extraction of this gold. It is absolutely astounding. In South Africa, some of the largest mines are now miles and miles deep, necessitating incredible energy output to get an ounce of marketable gold. This will certainly be something to monitor.
__________________ All things being equal, the simplest answer is quite often the correct answer - Occam Last edited by ancona; 05-15-2012 at 08:13 PM. |
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | Ah yes, I remember seeing a video recently showing that the grams of extracted gold per ton of material was on a decreasing spiral. I also found this 15-year-old statistic at: http://www.galmarley.com/framesets/f...tials_faqs.htm Quote :
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | Here are some historic charts for gold mining ore grades for the past few decades: From http://www.kitco.com/ind/Resopp/20120504.html ![]() From http://articles.businessinsider.com/...ines-ore-grade ![]() |
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | OK, now let's project the above curve out another decade or so. The price pressure on gold (and silver) is going to be tremendous well BEFORE this line gets to zero grams/ton in 2025-2030. This, I believe, will drive the increase of the price of gold at a higher rate than inflation, being simply exacerbated by the QE printing of money. In other words, you will be able to get several high-end men's suits for an oz of gold in the very near future. IMHO, the projections of gold at $3000, $5000, $10000+/oz in the near future now seem even more real to me; and this being possible even without a Mad Max, SHTF, all-hell-breaks-loose world. ![]() |
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Yellow Jacket Join Date: Nov 2011 Location: Waaay south
Posts: 3,370
Liked: 2046 times | Tou know, there are thousands of square miles of land that is high in ore but off limits to prospecting. This is not fertile crorn belt stuff either, it's forbidding mountainous desert shit. The Government has seen fit to stop all prospecting in a lot of areas. I don't know if this is calculated or shat, but it is at the least, maddening.
__________________ All things being equal, the simplest answer is quite often the correct answer - Occam |
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Ground Beetle Join Date: Nov 2011
Posts: 971
Liked: 554 times | ...we are clearly at (or post) peak everything - gold is but another natural resource, that is FINITE, which inevitably conflicts with our "infinite growth required and built in" economic/monetary theories and policies. same with copper, silver, etc. I wouldn't be surprised AT ALL to learn that the costs of manufacturing something elementary have risen two-threefold since 15 years ago. That we as the people do not experience such a drastic inflation in our everyday shopping, is mainly due to continuously lowering the quality of the produce we buy everyday. But try to compare the prices of STUFF, hardcore STUFF, that cannot be cheapened (i.e.: grade steel, grade plywood, etc. ), because it is what it is, and no amount of tinkering can make it a "cheaper mouse trap" - it's price has risen dramatically. Even things like stupid minced meat - however rising in prices very high - if someone 15 years ago sold me a minced "meat", which "Ingredients" section on the packaging says "Meat content: 60%", He would go out of business immediately. Today - it is a norm in supermarkets - I never buy brands anymore, I read the "ingredients" sections only. And this is only what they let me KNOW about their ingredients, I am not kidding myself - still, better than not reading them. My point is, that industries, who use base, hardcore, elementary stuff as their input (mining seems to be one of them), they simply cannot possibly tint their input "meat" with soy, pink slime and fuck knows what else - they need to use grade steel, grade plywood (...). So their costs MUST rise, appropriately. EDIT: Unobtanium: that falling grade chart, answers very directly your original question about the costs of mining - if the grade was ~4 in '90ties, and it is ~1 now - they have to mince 4 times as much rock, to get the same amount of metal produced. That is costly, I'd say - energy hungry, equipment eating, chemicals, etc..... At least four times increase of base costs, and it does not take into account rising prices of "stuff" they use, to mince through all that rock... Phew, one have to mince >30tons of rocks for one Eagle coin, that tells us something about the resource depletion... Last edited by bushi; 05-16-2012 at 08:13 AM. |
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | Here is a pretty good interview with the USGS Mineral Commodities Specialist Micheal George about gold mining. http://news.goldseek.com/GoldSeek/1337842431.php Quote :
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | More about gold reserves, from: minerals.usgs.gov/minerals/pubs/mcs/2012/mcs2012.pdf Reserve Base. That part of an identified resource that meets specified minimum physical and chemical criteria related to current mining and production practices, including those for grade, quality, thickness, and depth. The reserve base is the inplace demonstrated (measured plus indicated) resource from which reserves are estimated. It may encompass those parts of the resources that have a reasonable potential for becoming economically available within planning horizons beyond those that assume proven technology and current economics. The reserve base includes those resources that are currently economic (reserves), marginally economic (marginal reserves), and some of those that are currently subeconomic (subeconomic resources). The term “geologic reserve” has been applied by others generally to the reserve-base category, but it also may include the inferred-reserve-base category; it is not a part of this classification system. Inferred Reserve Base. The in-place part of an identified resource from which inferred reserves are estimated. Quantitative estimates are based largely on knowledge of the geologic character of a deposit and for which there may be no samples or measurements. The estimates are based on an assumed continuity beyond the reserve base, for which there is geologic evidence. Reserves. That part of the reserve base which could be economically extracted or produced at the time of determination. The term reserves need not signify that extraction facilities are in place and operative. Reserves include only recoverable materials; thus, terms such as “extractable reserves” and “recoverable reserves” are redundant and are not a part of this classification system. Marginal Reserves. That part of the reserve base which, at the time of determination, borders on being economically producible. Its essential characteristic is economic uncertainty. Included are resources that would be producible, given postulated changes in economic or technological factors. Economic. This term implies that profitable extraction or production under defined investment assumptions has been established, analytically demonstrated, or assumed with reasonable certainty. Subeconomic Resources. The part of identified resources that does not meet the economic criteria of reserves and marginal reserves. |
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | http://www.hyperinflation-us.com/wor...ly_mining.html Quote :
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Predaceous stink bug Join Date: Apr 2012 Location: Backwoods of NY
Posts: 223
Liked: 123 times | Thanks for the interesting article, Unobtainum! I've wondered, for quite a while, what the cost of production was for silver. I've just never got around to researching it. Other than peak PMs, my curiosity is now piqued. ![]() ADK
__________________ I like the idea of trading silver with the gentlemen while keeping gold like a king and always appearing as a peasant... |
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PM Bug Supporter ![]() Join Date: Oct 2011 Location: SE USA
Posts: 1,275
Liked: 691 times | Great thread guys! |
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | Will keep adding useful mining snippets to this thread as I come across them.... |
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Ground Beetle Join Date: Nov 2011
Posts: 971
Liked: 554 times |
BUT.... with one caveat. To tap to these lower & lower grade resources, we need to do two things: first: literally, destroy whole counties, to claw ever-decreasing fractions of metals, from ever-increasing mountains of.... mountains? I don't have time now to google the images of copper mines, which are now huge holes in the ground, where the mountain used to be, but they look similar to that one: http://www.elmhurst.edu/~chm/vchembook/330copper.html second: with that known, how do you think it is, in terms of ENERGY required, to mince and further process, a fecking mountain? IF the oil is going north as it is, for the same reason (cheap & easy to get resource depletion) - all of the sudden, even the CURRENTLY economically viable deposits, might become unprofitable. (specifically: how ever-increasing oil price will affect the profitability/sustainability of the mining operations, in both current-grade deposits, let alone these supposedly "vast" lower-grade ones?). Like you said: miners need $1300/OZ, to cover their costs. That is with TODAY'S energy prices, right? But what will be the price per OZ required, if energy price doubled? Why people make the assumption, that "gold price will continue to rise, making worse-grade deposits profitable", without coming to quite a symmetrical conclusion, that oil (by extension: energy) price, will follow at same or even faster pace (increasing developing world competition for their bite of the ever-shrinking cake of cheap energy), making these lower-grade ores non-economical back again? (...)and if humans want more badly enough, we can get it. ahh, typical economic arrogance, that assumes our greed and lust will overcome physics, somehow, just because we want something. I think that all economists in the world, must have been very spoiled children, who grew up thinking that the whole world will make an exception to the laws of physics and even some algebra, just because they want it so bad. In terms of depleting easy-obtainable oil, there is simple measure, when the party stops. Marginal barrel, which is when we spend a barrel of energy equivalent, to get one barrel off the ground and to the pump. (Think about it as all of the energy that has been put in place over the lifetime of the derrick - starting with... getting the ore off the ground, process it to make steel, transport, assemble&maintain that steel into an oil derrick, etc, etc.). We are at the collision course for these two graphs to cross ![]() http://mercurymasterpunk.ca/images/oil_derrick.jpg to these http://www.commondreams.org/headlines01/0320-02.htm ...and it takes A LOT of embedded energy to make and use them. Not to mention the risks... I don't know how to make the analogy of "marginal barrel" for gold, but these "theoretical abundance" mind-exercises fall short of taking even the parallel effects to their own assumptions into consideration, let alone other real-world factors. Amusingly (not!), our economic policies/frameworks, were designed in times, when the capital scarcity was the main problem - there were always new resources available, if we could manage to get together enough capital to work, to get them out of the ground. Thus, all the scholars in the field of economy, all the Bernankes, Draghis and others, operate under that false assumption, that it is, and always will be the case (while it is even an algebraic impossibility, not even a real-world one). While it clearly is not, anymore. Last edited by bushi; 06-25-2012 at 10:04 AM. | |
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Yellow Jacket ![]() Join Date: Nov 2011 Location: Floyd, Virginia
Posts: 1,682
Liked: 1233 times | Yup, we've pretty much "high-graded" everything at this point, only minor exceptions exist. New tech might overcome some of that for some things, but not for most. Gold from ocean water is *almost* worth it and will be if prices rise enough, but that's more or less the same situation. You take some out, and at some point the concentration of what's left goes down. That is, unless you can store whole oceans of already processed seawater someplace instead of having to put it back to dilute whats left. Good luck with that! |
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Big-eyed bug Join Date: Nov 2011
Posts: 451
Liked: 344 times | Thanks bushi and DC. You comments make the extrapolated curve in post #5 and even more curious and interesting curve. |
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Ground Beetle Join Date: Nov 2011
Posts: 971
Liked: 554 times | Yeah, in terms of supply/demand, I think that if traders had ANY idea about what is going on in the real world, and that unlike technical analysis, charts, electrons, derivatives casino, "money for nothing" creation and talking heads world, there are very hard LIMITS of what we could possibly get from Earth - they should already killing each other over what' s left in non-renewable commodities. See what Chinese are doing... Gold is but one of them, but similar charts can be drawn for almost anything today. What is scary, and puts us on a direct crash course, is that our economic/monetary systems, (as of today), they require year-on-year exponential growth of economy - just to prevent them from collapsing. So, to be compatible with even TODAY's resource extraction rates, we would need technology to provide reverse-exponential upgrades in material usage, year on year. Can you imagine that each year, the stuff that we manufacture & consume, uses x% less and less base material & energy to manufacture (where x is equal to real GDP growth, to stay flat with base resource usage)? I mean, yes, it happens, we are getting more and more crap products for our money (heuristics in CPI, anyone? ![]() Space mining... The only viable option, going forward? But is it possible at all? And the energy requirements for that to happened... My gosh. |
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Super Moderator ![]() Join Date: Mar 2012 Location: Migratory
Posts: 1,620
Liked: 685 times |
Take a look at the half life curve of USD priced in gold grams: http://pricedingold.com/2012/06/08/u...te-7-jun-2012/
__________________ I drive men mad For love of me, Easily beaten, Never free. PMBug 101 *** Forum Rules | |
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Ground Beetle Join Date: Nov 2011
Posts: 971
Liked: 554 times | but benjamen, should such debasement ever "work" economically, I would be living as a king in Poland (actually, we all Poles would), haven't been emigrated, Russian empire wouldn't collapse, and I wouldn't be typing it, for I wouldn't be allowed the luxury of open communication from behind the Iron Curtain. There is the real component of GDP growth, and there is monetary/inflationary component of it (caused by increasing money supply). The second one is a hidden tax/theft of capital, by government/CB. If inflating GDP by printing money could ever lead to anything else than destruction of an economy, well, that's all that we would ever need to do. But I haven't seen this implemented successfully, and I really struggle to call it anything but a nonsense. Besides, it is strongly inflationary, and there's no way around it. |
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Super Moderator ![]() Join Date: Mar 2012 Location: Migratory
Posts: 1,620
Liked: 685 times |
__________________ I drive men mad For love of me, Easily beaten, Never free. PMBug 101 *** Forum Rules | |
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