(Kitco News) – Gold miners need to invest billions of dollars in exploration if they want to maintain 2019 production levels, according to the latest research from Wood Mackenzie.

In a report published Wednesday, Rory Townsend, head of gold research at the research firm, said that the mining sector needs to invest $37 billion by 2025 if the sector wants to maintain production levels reported in 2019. He added that the idea of peak gold continues to grow as companies haven’t replaced current production.

“Prior to the coronavirus outbreak, peak gold supply was becoming a real possibility. Now, with exploration programmes paused or cancelled and project disruptions hampering production, the summit is in sight,” Townsend said.

According to the firm’s latest research, the mining sector needs to find about eight million ounces of gold by 2025 to maintain current production levels. This equates to developing about 44 projects.

“If all our probable projects were to come online before 2025, this would almost meet the requirement to maintain 2019 production levels. The likelihood, however, is that we see some degree of slippage among a number of these assets due to permitting delays, prioritisation of other capital projects and changes in scope,” Townsend said.

Looking at how the mining sector should fill the impending production pipeline gap, Townsend said that smaller might be better. He noted that smaller projects will require less capital and would be easier to permit.

“At a time of heightened economic uncertainty, the largest gold projects may struggle to secure financing until there is more clarity,” Townsend said. “Smaller projects are proving an exciting proposition. They have the advantage of a lower initial capital outlay and can be typically brought online with speed and efficiency, particularly open pit deposits and mines that have previously been in operation. The drawback to these projects, however, is the fact that they will struggle to nudge the needle for a material gold producer.”

Author: Neils Christensen

Source: Kitco: Gold miners need to invest $37 billion in exploration by 2025 to avoid a peak production – WoodMac

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