Gold RRS 2022 — Surge in recent discoveries

Introduction

Our annual analysis of major gold discoveries identified 341 deposits discovered over the 1990-2021 period, containing 2.70 billion ounces of gold in reserves, resources and past production, up from our 2021 analysis of 329 deposits containing 2.58 billion ounces in 1990-2020. The recent gold price bull run — in which the London Bullion Market Association gold price increased from an average of $1,284 per ounce in May 2019 to $1,922/oz in September 2020 before slightly decreasing — along with improved financing conditions, allowed gold exploration budgets to increase to $6.20 billion in 2021 from $4.31 billion in 2019. Increased exploration resulted in 16 new discoveries, along with five over the last few years.

Elevated gold exploration budgets over the past several years led to an increase in the number of recent major discoveries. Of the 122 million-ounce increase in discovered gold since compared with our 2021 analysis, however, 65.2 Moz was added to deposits discovered during the 1990s, with the bulk of that increase at operating assets.

Despite the higher number of recent discoveries, only 28 of the 341 deposits included in this analysis were discovered over the past decade, containing 171.8 Moz, or 6% of all gold discovered since 1990. With gold production plateauing in the near term and expected to decline over the next five to six years, the industry is not making enough new, high-quality discoveries to support the long-term pipeline.

The discoveries dataset prepared by S&P Global Market Intelligence includes all deposits containing over 2 Moz of gold in reserves, resources and past production, although the data set may include rare exceptions. The year of discovery corresponds with the year of the initial drill program that identified the potential economic mineralization, which eventually led to the definition of reserves and resources that meet or surpass our major discovery threshold. As assets increase resources above the threshold, they are assessed and added to the discovery dataset. Likewise, we remove an asset from the data set if its total endowment drops below our threshold.

A full list of the included discoveries can be found here.

Industry continues to focus on older, known deposits

We have long documented the declining number of annual major new discoveries. The industry continues to focus on older, known deposits despite increased exploration spending and a rise in the number of new discoveries. Of the 122-Moz year-over-year increase in our list of discoveries, for example, 65.2 Moz was added to deposits discovered during the '90s, with the bulk of that increase at operating assets. Despite the higher number of recent discoveries, only 28 of the 341 deposits included in this analysis were discovered over the past decade, containing just 171.8 Moz, or 6% of all gold discovered since 1990. Although we believe the sharp decline reflects the lack of new significant deposits being found and explored, a portion of the recent shortfall reflects a lack of the remaining exploration effort required to expand the known endowment of newly found deposits beyond our major discovery threshold.

To account for this, we estimated gold in discoveries expected to meet our criteria in the future. While this has resulted in the amount of discovered gold increasing in some years, the total for the past decade might only rise to about 251.6 Moz once companies complete follow-up exploration efforts. By comparison, 1990 alone has 233.1 Moz of gold in 10 deposits, boosted by several massive discoveries, including the Pebble and Donlin deposits in Alaska.

Note: Implied discovery cost accounts only for the exploration spending in the discovery year; therefore, it likely omits exploration spending in prior years that contributed to the discovery and omits subsequent exploration that expanded the initial discovery beyond our major discovery threshold.

Compared with earlier years, the lack of new major discoveries over the past decade results from companies focusing on advanced-stage assets and known deposits rather than searching for new greenfield discoveries. Market Intelligence's annual Corporate Exploration Strategies series has long noted the industry's shift away from risky grassroots exploration in favor of exploration at known deposits and near operating mines. The share of gold exploration budgets devoted to grassroots exploration has halved since the 1990s. Both pure explorers and producers have shifted their exploration spending, with juniors increasingly focused on expanding known deposits, while producers have increasingly focused on exploring at their existing operations. Although companies have found some new major discoveries at late-stage projects and existing mining camps, the potential to find new major discoveries at such projects is less than at riskier, early-stage prospects.

New discovery pushes Ecuador to top spot

Ecuador returned as the country with the most discovered gold in the past decade, after dipping below Indonesia in our 2021 analysis. This is the result of SolGold PLC's 2020 discovery of the Cacharposa deposit at its Porvenir project. In December 2021, SolGold announced an initial resource at Cacharposa of 493.7 million tonnes grading 0.34% copper and 0.14 grams of gold per tonne for 1.7 Mt of contained copper and 2.2 Moz of gold, which makes the deposit a major gold and copper discovery. Cacharposa and Cascabel give Ecuador a total of 28.2 Moz of gold in major discoveries over the past decade.

Though historically prolific areas for gold discoveries, Canada and the U.S. have underperformed over recent years, falling drastically year over year from third and sixth to 9th and 16th, respectively.

Two-thirds of gold discovered in past decade in 10 largest assets

Of the 171.8 Moz contained in the 28 discoveries made over the past decade, 67%, or 114.6 Moz, is contained in the 10 largest deposits. The largest is Vale SA's Hu'u at Onto in Indonesia, the 13th-largest discovery since 1990, containing 27 Moz of gold. A prefeasibility study is under way at Hu'u, where results were originally expected in 2019; Vale continued to list the asset as in prefeasibility as of April 2022.

SolGold's Cascabel discovery in Ecuador currently has a resource estimate for the Alpala and Tandayama-America areas totaling 22.9 Moz of gold. Exploration continues at Tandayama-America, with an update to its resources under way. Work continues on the Cascabel prefeasibility study, which SolGold delayed to mid-2022.

There has been almost no news on the White Rivers/Harmony Gold JV asset in South Africa, the third-largest discovery, since its original announcement in 2016. The joint venture area, discovered near Harmony Gold Mining Co. Ltd.'s Target mine, hosts 11.5 Moz of gold and 9.2 million pounds of triuranium octoxide.

Global gold production near peak

Our research into the gold production pipeline shows future supply growth, if any, will be relatively minor over the next decade, with even the most optimistic view showing gold production declining by 2028. Although there are several reasons for this, a contributing factor is a lack of quality assets available for development. While nearly half the discoveries included in our analysis are not yet in production, only 33 have over 10 Moz of gold in reserves and resources — enough for a mine to produce over 200,000 ounces per year of gold over a significant mine life. But many of these assets have a long road to production, including feasibility studies and permitting, making them unlikely to have a near- or medium-term impact on the pipeline.

The industry needs to invest more in all levels of the pipeline, from grassroots exploration to locate more quality discoveries to approving funds for construction, to prevent severe supply reductions within the coming years.

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