Newmont tells conference that global gold discoveries are falling behind the discovery pace – as costs rise

The world is facing a diminishing level of major gold discoveries above 5 Moz and is danger of global output and costs rising above the rate of new reserves, according to the world’s second largest gold miner, Newmont. Addressing the opening day of the 2008 Paydirt Gold Conference in Perth, Newmont Australia’s General Manager – Tanami Operations, Adriaan van Kersen, cited his company’s own experience as indicative of the tightening discovery versus mining trend on a broader scale within the gold sector.

“Newmont depletes its reserves at 10 oz a minute and needs a replacement discovery rate of near 14 oz a minute,”  van Kersen said. “However, only 4% percent of gold deposits in the world are now above 5 Moz in reserves.”

“Exploration is not only becoming tougher and riskier but more expensive and it is becoming more and more difficult to find gold in any surface quantity. As an industry, we are spending more and more on exploration but even in a high demand and high price environment, and more drilling happening, the gold sector is not discovering the same ounces as it used to.

“Against this background, there is an alarming and decreasing trend in discoveries above 1 Moz and the sector is now facing real challenges of replacing its production unless there are technological breakthroughs.”

He also warned against the impact of rising costs – up 24% in the past year as higher fuel, spare parts and labour costs impacted heavily.

Newmont plans to produce between 5.1 and 5.4 Moz of gold in 2008. The company has 86 Moz of gold in its global reserves inventory including major Australian mines, and for 2008, has assigned an exploration budget of $220-230 million for exploration.

The sale last year of its merchant banking unit generated $1.3billion in proceeds, further built on with a $1 billion convertible notes raising to help drive an invigorated global exploration, acquisition and mining campaign.