What makes a world-class gold deposit? We’ve put together a list of various factors that investors should consider in their research.
With several hundred gold mines producing worldwide, almost every country is home to at least a few — but what makes a world-class deposit?
The world’s largest gold mine is Freeport-McMoRan’s (NYSE:FCX) Grasberg mine in Indonesia. Open-pit operations began in 1990, and even today the Grasberg minerals district remains an important source of gold.
But apart from size, what makes a world-class gold deposit? Various characteristics must be considered when determining the status of a gold deposit, including deposit type, average grade and mining and processing costs. Read on to learn more about those three factors and how they can be used to identify world-class gold deposits.
1. What makes a world-class gold deposit?: Look for lode
Gold deposits are formed by a wide range of geological processes, and according to the US Geological Survey, generally fall into two categories: lode deposits and placer deposits. Gold can be found in these deposits in a variety of forms, including nuggets, fine grains, flakes and microscopic particles. The metal is usually found alloyed to silver as electrum or with mercury as an amalgam.
Lode deposits are considered primary gold deposits because they are bedrock deposits that have not been moved. They come in a range of shapes and sizes — indeed, the US Geological Survey notes that they can “form tabular cross-cutting vein deposits but also take the forms of breccia zones, irregular replacement bodies, pipes, stock-works, and other shapes.”
Placer deposits are secondary deposits, and they are created when lode deposits are eroded and the gold in them is redeposited. Often alluvial processes are responsible for forming these deposits — running water will erode a lode deposit, and then the gold will fall from suspension as the water slows, creating placer deposits in places like the inside bends of rivers and creeks.
In the past, placer deposits were important sources of gold, but today few economically important placer deposits remain in the world. The top gold deposits are now lode deposits.
2. What makes a world-class gold deposit?: Grade — the higher the better (usually)
Ore grade refers to the proportion of gold contained in the ore of a particular mine and is represented in grams per metric ton (g/t). Generally, companies want to find deposits with higher grades as they contain more gold and will usually be more economically sound.
According to the World Gold Council, larger and better-quality underground mines contain around 8 to 10 g/t gold, while marginal underground mines average around 4 to 6 g/t gold. Open-pit mines usually range from 1 to 4 g/t gold, but can still be highly valuable.
3. What makes a world-class gold deposit?: Mining and processing costs — keep them low
While looking at grade is important, it’s crucial to remember that even a high-grade gold deposit can be uneconomic if extracting the gold it contains would be too expensive.
Placer gold deposits are generally easier and cheaper to extract gold from, but as mentioned above, few economic placer gold deposits remain today — those in existence are mostly low grade and not large enough to be viable. It is harder to extract gold from lode deposits as either open-pit or underground mining operations must be constructed, but as technology continues to advance, companies are becoming better able to streamline operations and cut costs.
One increasingly important factor weighing on mining costs is that gold production is becoming more and more reliant on smaller operations rather than individual large-scale mines. This shift has raised development and operating costs in the gold industry as a whole.
In addition to extraction costs, it is also important to look at the processing costs a deposit will incur. The type of processing used generally depends on a deposit’s grade, and there are pros and cons to each different type. For instance, the US Geological Survey explains that heap leaching and vat leaching are “relatively low-cost processes” that have made it economic to mine lower-grade deposits.
However, these processing methods “extract somewhat less of the contained gold than the cyanide-extraction methods used for higher grade ore.” Ultimately, companies must choose the best method for their deposit while keeping costs as low as possible — world-class deposits will be those where large amounts of gold can be mined and processed at a relatively low cost.
Examples of world-class gold deposits
Along with the Grasberg mine in Indonesia, other examples of world-class gold deposits include:
- Nevada Gold Mines, a joint venture between Barrick Gold (TSX:ABX,NYSE:GOLD) and Newmont Goldcorp (TSX:NGT,NYSE:NEM), is comprised of two Nevada-based mines: Cortez and Goldstrike.
- Peru’s Yanacocha mine, also operated by Newmont Goldcorp, in a joint venture with Compania de Minas Buenaventura.
- The Boddington mine in Australia, also operated by Newmont Goldcorp.
- The Muruntau mine is owned and operated by the government of Uzbekistan.
- Newmont Nevada, owned by Newmont Goldcorp and Barrick and consists of a total of 11 mines and 13 processing facilities, stretching over 2.6 million acres in the state.
- The Olimpiada mine in Russia, operated by UK-based Polyus Gold (MCX:PLZL).
- The Lihir mine, located on Lihir Island in Papua New Guinea, owned and operated by Newcrest Mining (ASX:NCM,OTC Pink:NCMGF).
- The Kibali mine, a joint venture between Barrick, AngloGold Ashanti (ASX:AGG,NYSE:AU,OTC Pink:AULGF) and the Democratic Republic of Congo’s state miner Sokimo.
- Cadia Hill, an open pit mine owned by Newcrest within the Cadia Valley in Australia.
This is an updated version of an article originally published by the Investing News Network in 2010.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.