Gold Mining 101

Gold mining

The recent gold shopping spree in the Asian market combined with gold coins rush in North America made some people ask, where does this gold come from? The simple answer was from the mines all over the world. This question lead us to another, are gold mining shares a good investment? Who are the big players? Who are the gold miners? Better understanding of the gold mining companies might help in answering these questions.

Mining Techniques

Starting with gold mining process, generally, the most common mining techniques used is the hard rock mining, placer mining and byproduct gold mining.

Hard rock mining is extracting gold from hard rocks! These are the hardest of them all, as some deep mines are so hot and needs recycling the air down there, plus the safety issues.

Placer mining, on the contrary, is mining gold from lose-materials, which makes it difficult to tunnel. The challenge here is these easy-to-mine deposits are almost depleted. Our ancestors have already used these techniques and what is left might be worthless the effort.

Gold is also a byproduct of other base metals mining process, mainly large copper mines. The amount of gold here is not tremendous. Still, it is a considerable amount. The third largest copper mine produced more than 50 metric tons of gold in 2006 beside their main production of copper.

The Big 10

There are different methods to rank gold mining companies. One of them is market capitalization, the total value of shares issued by these companies.

Here the top 10 mining companies in terms of CAP

  1. Barrick Gold ($49 bn.)
  2. Goldcrop ($39 bn.)
  3. Newmont Mining ($29.09 bn.)
  4. Newcrest Mining ($26 bn.)
  5. AngloGold Ashanti ($16.7 bn.)
  6. Yamana Gold ($13 bn.)
  7. Kinross Gold ($11.5 bn.)
  8. Gold Fields ($11.26 bn.)
  9. Eldorado Gold ($10.59 bn.)
  10. Polyus Gold ($10.1 bn.)

5 out of these 10 are Canadian companies, where Canada dominates the gold mining industry. The U.S. and South Africa contributes in this industry with a decent share too. The newest big player in the mining game is China. Old Russia has its mining companies and its own deposits, in addition to mines in the old USSR allied nations which keep its presence in the mining industry.

Gold Mining Production and Cost

Most of these companies work in foreign mines, in South-America, Africa, Asia and Eastern Europe. Why not to mine there? Cheap labor, less restricting laws and rich gold deposits are all good reasons to operate in foreign countries. The catch here is the political instability could halt mining operations. Not to mention the hazardous environment where artisanal miners work sometimes pause the mining process. 3 different accidents were gold miners lost their lives occurred just in May 2013.

Gold mining cost per ounce range from $500 to $1000. Unless the mining companies invent new technologies to mine gold with lower costs, gold price would rise dramatically. Note that gold production is slowly and steadily declining for the past years.

Another approach is finding new deposits in new gold destinations, such as the Middle-East, Western China and North America. Although the political stability may be worst, but gold deposits might be worth the venture. Especially after the reformations in the Middle-East and China, it might deserve a second thought.

To sum up, maybe all the questions wasn’t answered, but at least we got a lead on gold mining process, where does it stand now, and where it is heading. Mining companies affect gold prices for sure, either directly or indirectly. That’s why many defend higher gold prices, or expect gold prices to rise even more. Investing in gold mining shares is a valuable option for the gold investors, along with gold ETFs and Forex Gold.