by Peter Schiff, Schiff Gold:
South African gold output saw its biggest drop in over a year in May, falling 16.2% year-on-year. This is another sign that the one-time world leader in gold production could be running out of the yellow metal.
May’s decline came on the heels of a 5.8% drop in production in April. It was the eighth consecutive month of declining output for South African gold mines, according to Pretoria-based Statistics South Africa.
With the exception of a three-month surge in gold-mine output last summer, the amount of gold pulled out of the South African earth has been on a downward trend since the beginning of 2017.
According to Bloomberg, aging infrastructure, reserve depletion and accidents have raised costs and curbed mine output in South Africa.
In its heyday, South Africa was the giant in gold production, but the country has fallen from number one to number eight over the last few years.
More than 40% of all the gold mined in human history came from the Witwatersrand Basin. These mines are now nearing the end of their life cycle. According to the Environmental Economic Accounts Compendium published by African Statistics Day, the country could run out of gold within the next four decades. Analysts say that at current production levels, South Africa has only 39 years of accessible gold reserves remaining.
In 1970, South African mines produced 1,000 tons of gold. Since then, production has steadily dropped. The country only produced 167.1 tons in 2016. That represents an 83% drop from the 1970 peak.
This is part of a bigger picture. Worldwide gold production appears to be declining. As we reported earlier this week, many of the top people responsible for supplying the world’s gold say we’re running out of the yellow metal. Mining execs are concerned because they are no longer finding large deposits to replace aging mines. Last fall, Franco-Nevada chairman Pierre Lassonde said he expects a significant dip in gold production in the coming years. A couple of months ago, the head of the world’s largest mining company when as far as to say we’ve found all of the gold. Goldcorp CEO Ian Telfer told the Financial Times, “We’re right at peak gold here.”
Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s.
Are we really at peak gold? It’s hard to say for sure. A few major discoveries could change the narrative. Technological advances could allow miners to extract gold that is currently uneconomical to mine. But nearly all of the big players in the gold mining industry agree that gold production will at least plateau, if not drop off over the next couple of decades, and many of the biggest players are talking about peak gold.