Sabina Silver wird zu Sabina Gold and Silver

However, the tide appears to turning as industry sentiment has recently been more vocal about the need to replace the value that global miners are taking out of the ground. During the virtual Joburg Indaba mining conference this week, South African mining luminary Sir Mick Davis said on Thursday, “Every single day that they take something out of the ground, that value disappears forever, and unless you do something to replace that value, you are going to end up withering and dying.”

Additionally, Barrick Gold CEO Mark Bristow on Wednesday said the gold industry in Africa should consolidate further, as he warned of a "serious reserve crisis" looming for the sector. A dearth of exploration has seen average mine life across the gold mining sector fall from 20 years to closer to 10 years, he added, speaking at the Joburg Indaba mining conference.

“The prospect of a serious reserve crisis is looming,” said Bristow. Gold production across the industry has only increased by 1.6% every year for the past two decades, he said. The Barrick CEO then said this week's deal between Northern Star Resources and Saracen Mineral Holdings was a "great example" of industry consolidation that should be celebrated.

While underground gold reserves held by major mining firms continue to be low and falling, new reserves are becoming increasingly harder to find as resources are used up, and exploration is costly. Major mining companies have a few ways to remedy their shortages. They must either discover new underground resources through exploration, or acquire them via the takeover of junior development companies.

According to S&P Global Market Intelligence, the 20 top gold producers spent on average $51.3 billion on acquisitions over the past decade. But in the same period, they spent less than a third, just $18.2 billion, on exploration. Despite the high gold price, currently S&P is citing a 29% drop in global miner exploration budgets this year.

Since the industry acquisition wave during the previous gold boom left a legacy of over $80 billon of write-downs when gold prices crashed, I expect the coming M&A activity will be driven by the need for value-added reserves. The industry has returned to fundamentals and balance sheet health, over adding ounces at any price.

After years of underinvestment during the previous bear market, global miner production profiles are under pressure which makes further M&A inevitable during the next few years.

Quelle: www.kitco.com/commentaries/2020-10-09/...-getting-louder.html