Make Kitco Your Homepage

Gold Prices To 'Move North' Due To Lack Of Exploration

Kitco News

Gold Prices To 'Move North' Due To Lack Of Exploration

(Kitco News) - Gold prices are expected to rise as mining exploration struggles to find enough new discoveries to add to the global reserves, said one mining executive.

“Gold has a much higher probability of moving north as opposed to south,” Stephen Letwin, chief executive officer at Iamgold Corp, told Bloomberg in Hong Kong on Thursday. “I’ve been around a long time; when you’re in an industry that’s not replacing what it produces, eventually, the price has to move up.”

Iamgold wants to boost production to 1.35 million ounces in the next four years from the current 875,000 ounces. The plan is to increase exploration around existing mines and expand its Canadian Westwood operation, Letwin noted.

“Our shareholders are buying our equity because they want exposure to gold,” he said.

The mining company shells out about $45 million a year on exploration and does not usually get excited about acquisitions, Letwin added.

Last year, the World Gold Council (WGC) estimated that gold production “peaked” in 2017.

The WGS said: “… [global] annual mine production of 3,268.7t – fractionally higher compared to 2016 – and the highest annual total in our records.”

The WGC also pointed out that gold prices will be driven by four factors in 2018: increased market volatility, a rotation into defensive assets, a growing global middle class and growing market transparency. 

The mining industry has been expressing the idea of gold production reaching its peak for some time now.

Auryn Resources executive director Ivan Bebek told Kitco News at last year’s Mines & Money conference in Toronto that “it’s not easy to find gold.” 

“I feel like we’re in an 2005-06 era with an initial comeback for the juniors,” Bebek said. “But growth is becoming a challenge for exploration companies.”

CEO of Wheaton Precious Metals Randy Smallwood echoed a similar outlook

“I use a phrase called geological inflation - it’s getting tougher to find ore bodies and there’s not as much effort being put into it,” Smallwood said on the sidelines of the Mines & Money conference. “We can see already in silver production, where we’ve truly reached a peak. Gold is right around that stage too.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.