Will Gold Miners Spend to Develop New Mines?

Major gold mining companies have embraced fiscal discipline that is boosting profit margins and stockholder dividends, but also raising questions about the future supply of gold. To increase returns to investors, miners are focused on maximizing value from their existing mines rather than spending heavily on developing new sources of gold, a strategy that carries far less risk than seeking to uncover new deposits. 

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A safe-haven during uncertainty

Capital expenditures are believed to have been flat in 2020, after a steep decline in recent years. The 12 largest miners in 2019 invested less than half of the $35 billion they allotted to capital expenditures in 2012, according to Metals Focus. As a result, there are few new major gold discoveries. 

Put in perspective, mining companies discovered 278 major gold deposits between 1990 and 2019, according to S&P Global Market Intelligence. But the vast majority of those were made before 2010. Only 25 deposits were uncovered since 2010 and none between 2017 and 2019. 

As a consequence, there are relatively few undeveloped gold deposits that can replace gold mines that will be depleted over the next quarter-century. 

This is a positive for the long-term price of gold if demand for the precious metal remains stable, and a strong positive if demand increases. 

Diversify Your Portfolio with Gold

A safe-haven during uncertainty