Large-Cap Gold Miners Have A Big Problem On Their Hands

April 19, 2017 7:10am NYSE:GDX

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From Sean Brodrick: If you listen hard … in the dark of the night … in the mining fields … you might hear the steady drip-drip-drip of big miners getting the night sweats.


It’s not because of gold prices, which are actually looking quite good.

No, it’s the latest data on gold ore grades.

Gold grade is simply how much gold you get out of a metric ton of rock. If ore grades 1.5 grams per ton, you must move and process a ton of rock to get 1.5 grams of gold.

Does that sound like very little reward for the work? Well, hang on to your mining helmets …

The 2016 average primary gold reserves grade was 1.15 grams per metric ton. That’s a drop of 20% from the current mean process grade of 1.44.

1.15 grams is 0.036 troy ounces. Take a look at the chart …

The data comes via Bloomberg from industry analysts at Metals Focus, after crunching the numbers from Randgold Resources (GOLD), Kinross Gold (KGC), AngloGold Ashanti (AU), Gold Fields (GFI) and other big producers.

Looking at the chart, you can see that gold grades have declined for years. That’s because miners are smart enough to produce the easy stuff first.

Sure, it’s not a straight line. On the right side of the chart, you can see grades went up — for a while — as gold prices peaked and the gold bear market started. That’s because miners wrote off large areas of low-grade reserves they knew would never be profitable.

Now, why are grades going down? They aren’t reclassifying those low-grade deposits again. Not yet. It’s more likely they’re simply running out of the higher-grade ore.

Metals Focus Ltd. reckons the world’s 50 largest gold mines have a mine life of just over 11 years, based on average mine-life reserves remaining.

So how do they solve this problem? I already told you how in my story, “Why Junior Miners are on the Launch Pad.”

In other words, big miners will buy projects from junior miners. Or sometimes just buy whole companies lock, stock and barrel. As I wrote in my previous article:

Sure, they’re paying up. They have the cash. They run freaking gold mines, for Pete’s sake. Of course they have the money.

And even though the big miners pay up, they end up spending a lot less money and, importantly, time than if they had tried to find that new project from scratch.

So, who are the big miners likely to buy? I told you the answer to that in another article, “Canadian Stocks are Cheap … But Not for Long!” That’s because Canada is where juniors go to list … AND because Canadian juniors simply represent the best values on the planet.

Let me tell you: 11 years of reserve life is nothing. NOTHING! It can take a dozen years or MORE to bring a new mine online.

These big companies are playing “beat the clock.” Time is not on their side. Meanwhile, they have fat treasuries. Of course they’re going to go shopping.

This blue light shopping special is about to start. Get yourself positioned before the big money goes “buy-buy-buy”!

Which miners will be the biggest beneficiaries? I’ll make sure you get that information in the next few days. Click here to let me know where to send it!

The VanEck Vectors Gold Miners ETF (NYSE:GDX) fell $0.23 (-0.95%) in premarket trading Wednesday. Year-to-date, GDX has gained 16.01%, versus a 4.63% rise in the benchmark S&P 500 index during the same period.

GDX currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #18 of 33 ETFs in the Precious Metals ETFs category.


This article is brought to you courtesy of Uncommon Wisdom Daily.


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