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The US
Geological Survey provides free and accessible data concerning both metallic
and non-metallic commercial minerals. The data includes estimates for both
the current rate at which each mineral is being mined and a global aggregate
value of the identified deposits for the amount of each mineral.
Using these two
sets of values, one can readily determine the expected mine life for each
mineral. Upon doing this, one thing of immediate note is that the current
identified and economically mineable reserves for
the important metals, five will expire in less than twenty
years at the present mining rate!
First some
definitions before we get to the chart.
The reserves refer to the proven & probable portion of
the reserve base that could be economically extracted or produced at the time
of determination. The term reserves need not signify that extraction
facilities are in place and operative.
The reserve base is the total measured & indicated
resource of an identified deposit that meets specified minimum physical and
chemical criteria related to current mining and production practices,
including those for grade, quality, thickness, and depth. This value includes
the proven & probable portion of the deposit as well as the marginal and
sub-economic reserves.
The total resource estimates for those minerals that have
them include inferred and undiscovered resource estimates for those deposits
that are hypothetical and/or speculative in nature.
Several
conclusions can be drawn from this analysis.
- Of the precious metals, the platinum group has
larger reserves than gold. Initially, this seems strange at first given
that all of the platinum group metals with the exception of palladium
are more expensive than gold. However, gold (and silver) have been mined
for millennia while mankind has only recently begun mining the platinum
group metals. For gold, at least 150,000 tonnes has already
been mined.
- The reserves for silver are higher than gold,
but given the faster mining rate, the reserve life for silver is less
than gold. From the existing silver reserves, if we continue mining at
the current rate, we will be out of mineable
silver in twelve years! Of course, as this event draws closer, the price
for silver will begin to increase, thereby resulting in marginally and
sub-economic grade deposits to become feasible thereby extending the
mine life.
- Important base metals such as tin, lead and
zinc are running low on reserves. Present mining rates will deplete
these in less than two decades. This will inevitably cause a surge in
the price for these metals and additional exploration for new deposits. The
estimated total world resource for these metals are large, so the
question isn't so much a matter of running out, it is more a question of
whether the price justifies the extraction and refining costs of the
underlying metal. Essentially, we are running out of cheap, readily
available sources of these metals.
As the
millennium unfolds and the existing known metal deposits are mined and
consumed we should see an increase in both the metal price and recycling
rate. Higher metal prices will justify the promotion of currently marginal or
sub-economic deposits to become commercially feasible to mine. It will also
increase the exploration budget of mining companies in efforts to find new
deposits or expand existing ones.
2007 was the
highest ever for mineral exploration budgets since the Metal's Economics Group began compiling
such information in 1989. For 2006,
a total of 1,624 companies with annual budgets of over
US$100,000 spent almost US$7.13 billion. That's up 47% from 2005. The largest
proportion of this spending (43%) was allocated to late-stage development as
mining companies seek to expand the size and grade of their producing mines. Another 39 percent was grassroots exploration.
As always, gold
attracted the most exploration dollars but copper, nickel and zinc all saw
proportional increases. Geographically speaking, the areas that saw the
greatest level of attention were Latin America, Canada
and Africa. Latin
America has been the leading destination for exploration for
more than a decade.
The late-90's saw stable or declining metal prices for a
variety of reasons. As a result, the exploration budgets of mining companies
diminished as they tried struggled to survive on their existing deposits. With
the advent of major economies such as China,
and to a lesser degree India,
beginning to industrialize the demand for metals has risen steadily to the
point where there exists an annual deficit for many metals.
China has surpassed
the US
in consumption of aluminium, coal, copper, lead, nickel, tin, and zinc. While
there are some significant projects in development over the next five years
(such as Oyu Tolgoi, Las Christinas, Agua Rica, Pebble, Toromocho), the lack of many new large-scale projects
will provide substantial support for strong metal prices. The long length of
time required between discovery and production means that even if a large
number of new discoveries occurred, they would not benefit global supply for
years to come.
Mike Hewitt
Editor
DollarDaze.org
Mike Hewitt
is the editor of www.DollarDaze.org, a website pertaining to
commentary on the instability of the global fiat monetary system and
investment strategies on mining companies.
Disclaimer:
The opinions expressed above are not
intended to be taken as investment advice. It is to be taken as opinion only
and I encourage you to complete your own due diligence when making an
investment decision.
©
2007 DollarDaze
Information contained herein is obtained from sources believed to be
reliable, but its accuracy cannot be guaranteed. It is not intended to
constitute individual investment advice and is not designed to meet your
personal financial situation. The opinions expressed herein are those of the author and are subject to change without notice.
The information herein may become outdated and there is no obligation to
update any such information. The author,
24hGold, entities in which they have an interest, family and associates may
from time to time have positions in the securities or commodities discussed.
No part of this publication can be reproduced without the written consent of
the author.
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