(Kitco News) - The race to cut costs, with exploration seeing the biggest chop, will jeopardize the future of mining companies, according to Brent Cook, geologist and editor of the Exploration Insights newsletter.
Speaking with Kitco News' Daniela Cambone at the 83rd Prospectors & Developers Association of Canada, Cook said that while companies have lowered their costs, the way they've gone about it is damaging long-term.
Brent Cook, geologist and editor of the Exploration Insights newsletter
"For a while, it was all about getting production up, they brought up lousy deposits, brought them into production, and now they're not making money on them," he said. "Now what's happening, to get down to what investors want, to what the institutions want - that's low all-in sustaining cost."
"So they're cutting across the board; they're cutting exploration, they're cutting development - if that's what you're doing to get there, you're killing your future."
Another alarm bell Cook sounded was the fact that companies aren't replacing the ounces being produced.
"Every ounce you produce, you have to replace, so by doing that they're temporarily reducing their production costs but they're not really adding to their future," Cook said. "Annual production is about 90 million ounces, which is just about 2% of the gold on the ground."
"If we do or don't find, it doesn't really matter to the gold that is traded but it matters to the mining companies because if they're going to stay in business on the whole, they've got to come up with 90 million ounces a year - that's an equivalent of one Carlin Trend. It's not happening."
Click HERE to listen to the full interview.