Toronto, ON, Canada (4E) – The merger of the world’s two largest gold producers, Barrick Gold Corp. and Newmont Mining Corp., may likely push through amid a recent falling out due to the declining number of gold discoveries, according to investors.
Aside from the depletion of gold mines, the increase in extraction costs is a factor necessitating the merger as it will allow the two companies to increase extraction efficiency, the Wall Street Journal said in a report last week citing investors’ views.
The report quoted Newmont stock owner and Tocqueville Asset Management LP fund manager Douglas Groh as saying, “There is every reason to do that deal, and the reasons not to do it weren’t geology, but man-made.”
MacDonald and Miller pointed out that exploration companies have been ramping up their operation “by a factor of six from 2001 through 2012 to $1,750 a troy ounce.” Discoveries have also been on a decline, from 22 gold deposits discovered in 1995 to only six in 2010. In 2011, there was only one discovery and in 2012 none.
In 2013, SNL Metals Economic Group said gold mining discoveries have been falling as exploration budgets reached $6 billion in 2012.
The consultancy group said most of the large discoveries in the last 15 years were found in Latin America and North America. China, now the number one producer of gold, has not made any large discoveries lately. In fact, Asia has the highest discovery cost at $75 per ounce.
It is not surprising that relatively young exploration companies like Premium Exploration, Inc. (OTC: PMMEF) has most of its projects in the United States and Mexico. The Canadian company boasts of their Idaho Gold Project in Elk City, Idaho County. The site is a re-emerging mining district believed to hold several bulk tonnage of deposits.
Since the initial drilling in 2009, eight gold discoveries were made along the Idaho project’s 12 miles of strike. Anomalous gold mineralization was also found in 99.9 percent of its drilling operations.
The Idaho Gold Project is composed of six contiguous zones: Buffalo Gulch Zone, Deadwood Zone, Friday Zone, Monday Zone, X Zone and Lucky Strike Zone. The Friday Zone has the most potential with 629,000 indicated and 146,000 inferred ounces of gold, according to Premium Exploration. Coming in second is the Buffalo Gulch Zone with 111,000 indicated gold ounces.