A Looming Gold Production Crisis

The growing difficulty of extracting gold ore from the earth’s crust makes gold mining hard enough. But now, new supplies of gold are shrinking as miners face a confluence of natural and man-made challenges.

Newmont Corporation, the world’ number-one gold miner, reported a sharp drop in production during the second quarter, as gold output sank 17 percent from the year-ago quarter to 1.24 million ounces. The company pointed to problems that have become persistent issues: a strike at its Pensaquito, Mexico mine that has suspended production; safety inspections that have put mining on hold at Cerro Negro, Argentina; the processing of low-grade ore stockpiles at Akyem, Ghana; as well as the evacuation and shutdown of the company’s Éléonore gold mine in Quebec due to Canadian wildfires. Newmont stock plunged after the company announced the news, sinking six percent, as investors questioned whether the company can meet its forecast of a rebound in the second half. TD Cowen Securities described that pledge as a “heavy lift.”

Facing challenges in growing production, Newmont is in the process of buying out Australia’s Goldcrest mining company for more than $19 billion, the most expensive acquisition in mining history.

Meanwhile, number-two miner Barrick has been struggling to revive gold output. Barrick’s gold production fell to its lowest level in 22 years last year and 2023 remains challenging as Barrick reported a slight decline in production during the second quarter.

Across the globe, global gold production fell more than ten percent during 2023’s first quarter, dropping to 856 metric tons.  

As miners repeatedly face labor problems, issues with mine safety, weather challenges, and obstacles to mining due to environmental concerns, it is becoming increasingly expensive to extract high-quality gold ore. Newmont said its all-in cost of gold production in the second quarter rose to $1,472 per ounce, up from $1,199 in the year-ago period, an increase of 23 percent.

It is little wonder, then, that the long-term trend for gold is upward, even as the precious metal fluctuates in price, day-to-day and month-to-month.