Wednesday, August 4, 2010

Peter Munk Sides With Peak Gold

The peak-gold case is being bolstered by none other than Peter Munk, the chairman of Barrick. Essentially, the case is based on the Law of Diminishing Returns and the fact that gold explorers are running out of world. According to Munk, it shows in the recent popularity of mixed-metal deposits - particularly, copper-gold. Dr. Jeffrey Lewis explains:
Mining companies would greatly prefer to dig for a single metal at a time. One metal in one area, with an acceptable ratio of content to dirt, is preferable. For example, should a company be able to pull out 5 grams of gold per ton of dirt, the mine will be wildly profitable. This type of ratio is good enough to develop consistent profits, and the companies can keep digging until every last piece is brought to the surface.

The problem is, however, that those types of mines are gone, and mixed metal operations are the last stop for sustained growth. Mixed metal mines are less profitable, thanks to the difficulty in sorting, as well as accounting for the potential profit and loss due to operations.

While there is still plenty of gold and silver to be found, the simple fact that these mixed metal mines are even on the radar indicates that the days of rampant production are over, and mines are being forced to look for smaller and smaller deposits of multiple types of metals to remain consistent in their growth rates. All in all, the supply of gold and silver in the ground is becoming freakishly low....

Peak gold is still controversial, as the world hasn't been exhausted yet. There are decent, and some huge, properties being found in unexplored areas of already well-combed areas like the Timmins district in Ontario, British Columbia and Alaska.

No comments:

Post a Comment