A Golden Opportunity for Climate Change…

Here in California, we live in one of the most environmentally conscious areas of the planet.

Not a year goes by without propositions being brought in to legislate about some aspect of environmental concern. This is great for the planet – but does not always align with business interests or short-term, localized concerns.

Precious metals have long been a source of controversy when it comes to eco-friendly and green matters.

The World Gold Council have just released a report – ”Gold and Climate Change” – which looks at the global impact of mining on the planet’s infrastructure – and what the industry is doing to tackle it.

As the world exhausts its supply of easily obtainable, surface, and what is known in mining circles as, “outcrop sources” – these are areas of exposed bedrock which allow miners to physically examine, and analyze the likely mineral deposits. Hence, miners must find new ways to explore and extract new veins and more.

This means that the physical extraction of gold is becoming more expensive – with the cost of exploration being more than the value of the discoveries. Minex Consulting – an industry analyst – estimated that between 2007 and 2016, $65 billion in exploration expenditures resulted in just $30 billion worth of discoveries – this is a net loss of $0.54 for every dollar spent.

These diminishing returns mean that companies are tempted to cut costs and slash budgets on things that they deem to be unimportant. The nature of gold deposits is that they are now mostly “covered” – that is, there are no surface deposits to simply pick up. The bedrock containing the gold has to be physically dug out to find the metal – and this metal has to be extracted from the material recovered.

Historically, this has been the area which has caused the environmental damage. Be it the old method of using high-pressure water to break down the rock – together with the diversion and pollution of water courses – or using acids to melt away the unwanted spoil – leaving toxic and dangerous chemical waste as a result.

New Ways to Extract Gold

The precious metals industry is not immune to criticism – and has been looking into new methods of exploration which do not involve racking environments which ultimately glean no result.

One of these methods is to use eucalyptus trees. Eucalyptus trees draw minute quantities of gold through their roots and into their leaves. Unbelievable, as this might seem, experimental trials in the Kalgoorlie region of Australia have found gold in both the leaf veins and the roots of the tree. Extraction of the gold is cheap and easy – and, as an added bonus – renewable.

Another method being tried which is similar is planting spinifex. This is a grass found as a native species in Australia – mostly in desert conditions. This means that it has deep roots which absorb minerals from the soil and bedrock in its surroundings. These roots can be examined for signs of gold deposits and can be an accurate precursor for follow up analysis – again – allowing non-viable areas to remain undisturbed.

Gold mining has a long history of panning – where deposits are sifted in sieves – which gradually get smaller in gauge – and catches nuggets and gold dust which are then “panned out.”

Scientists have now used this idea of gold being carried in water to test for traces of gold deposits upstream by drilling into underground water courses or using eco-friendly chemical dyes.

Underground radar and seismic screening are also methods that are being tested. With these ground penetrating radar and small controlled explosions are used to map bedrock strata and then analyzed to pinpoint likely deposit sites.

For the moment – from an investor’s point of view – the demand for gold far outstrips the supply.

This chart (from the World Gold Council’s 2017 annual report) shows, for example, that although gold demand in the United States, Japan, and Western Europe, for jewelry, fell by 64% between 1987 and 2016 – in China demand grew 2500% over the same period.

Recycled gold now makes up 25-30% of the gold supply.

Given the relative population sizes – this shift from West to East in gold demand is something which is likely to increase. With this increase – and gold becoming ever scarcer and more difficult to find – the long-term outlook for the precious metal seems assured.

Noble Gold specializes in IRAs and 401(k) rollovers through precious metals and cryptocurrencies investments.