World gold production in 2011 was 2,700 tons of gold (estimated by the USGS). Gold production had previously reached its peak in 2001 (2,600 tonnes of gold). The question is what does gold production look like in 2012 and whether production will again stagnate at this level.

Gold production around the world in 2011.

Among the eight largest historical gold producers in 2011, six increased their production and two fell.

1. Gold production in China grew 10 tons of gold (+2.9%), from 345 to 355 tons of gold.

2. Gold production in Australia increased by 9 tons of gold (+3.45%), 261 to 270 tons of gold.

3. Gold production from the U.S. increased 6 tons of gold (+2.6%), it increased from 231 to 237 tons of gold in 2011.

4. Gold production in Russia increased by 8 tons of gold (+4.17%), it increased from 192 to 200 tons of gold.

5. Gold production in South Africa increased by 1 tonne gold (+0.53%), it increased from 189 to 190 tonnes of gold.

6. Gold production in Peru fell 14 tonnes of gold (-8.5%), it increased from 164 to 150 tonnes of gold.

7. Gold production in Canada increased by 19 tons of gold (+20.9%), it increased from 91 to 110 tons of gold.

8. Gold production in Indonesia fell by 20 tonnes of gold (17%), it increased from 120 to 100 tonnes of gold.

Gold production of these eight historical top producers increased from 1,593 to 1,612 tonnes of gold, an increase of 1.19%. At the same time, world gold production increased by 140 tonnes of gold, or 5.47%. Once again, the small gold-producing countries experienced the strongest growth and attributed to the rising production. Their gold production increased by 121 tonnes of gold, or 12.5%.

Atomization of world gold production.

The share of small gold producers has increased since the beginning of the decline in gold production in South Africa in the early 70s. It rose from under 10% in 1970 to over 40% in 2011. But these small gold producing countries, collectively over a hundred different nations, just reach the level of production (1,088 tonnes of gold) of South Africa from 1969 to 1970 (1,000 tonnes of gold).

This fragmentation of world gold production has important consequences in terms of production costs. It was much easier and rational to produce 1,000 tons of gold on the Witwatersrand, in a 100 km radius around Johannesburg (economy of scale, staff, etc.) than scattered around the entire globe. Today, production of gold has turned into a global mosaic, it produces gold, but in smaller quantities in numerous mines far from each other.

The continually rising price of gold for 10 years has allowed the opening of many small gold mines from all over the world. They are often less profitable and therefore in a more precarious situation. They are much more sensitive to changes in gold prices and rising production costs.

Prospects for production in 2012 and beyond.

In 2010, I indicated that gold production would likely increase for 2 or 3 years. In summary, this increase was rooted in the rising price of an ounce of gold, temporary stagnation in production costs, the increase in demand (2008 crisis) and an increase in production from polymetallic mines (attributed to a increase in demand for industrial metals: copper, zinc).

Today, we should have an opposite phenomenon which should lead to the start of the decline in world gold production connected to the falling price (a consequence of the increase in world gold production from 2008 to 2011) and increasing production costs. This situation should last for a few years but will ultimately cause a new wave of rising gold prices.

NEWS RELEASE.

July 23, 2012: Montreal, Quebec – Stornoway Diamond Corp. (Stock Profile – TSX: SWY) announced it will shortly commence a 5,000 tonne bulk sample program of the Renard 65 Kimberlite pipe, located at Stornoway’s 100% owned Renard Diamond Project in north-central Quebec.

The objective of the bulk sample program is to collect a large enough parcel of diamonds to allow the conversion of material that is currently classified as an Inferred Mineral Resource to an Indicated Mineral Resource and then, if warranted, to a Mineral Reserve. Five thousand tonnes will be acquired from a previously opened trench where the R65 kimberlite is exposed at surface at its northern extent, and will be processed initially at Stornoway’s 10 tonne per hour dense media separation plant located at the project site. Final diamond recovery will be conducted at Stornoway’s North Vancouver lab facilities. The program is budgeted at C$2.5million, and is scheduled to be completed by the end of the year. Given previously measured grades at the sampling site, it is expected that approximately 1,000 carats of diamonds will be recovered, which will be sent to Antwerp, Belgium for valuation.

Matt Manson, President and CEO, commented: “The Renard 65 bulk sample program announced today offers the opportunity to add a large tonnage of open pit reserves to the Renard mine plan. Renard 65 is the largest of the project’s kimberlites, and although its grade is lower than Renard 2 and 3, its diamond characteristics are similar and it is easily accessible from surface.”

To learn more – CLICK HERE.

CompanyFeed™

Potash stocks are on the move again. The recent heat wave and drought hitting the Midwestern United States has seen corn prices jump 38% since June 1st.

The Obama administration identified the current drought plaguing farmers across the U.S. as the worst in 25 years. Agriculture Secretary Tom Vilsack said on Wednesday, “Part of the problem we’re facing is that weather conditions were so good at the beginning of the season that farmers got in the field early and as a result this drought comes at a very difficult and painful time in their ability to have their crops have good yield.”

According to Vilsack, three-fifths of the U.S. land mass and much of the country’s corn and soybean crops have been affected by the lack of rain.

As a result of the crisis, Citi Investment Research analyst P.J. Juvekar wrote,”We think North American fertilizer producers are poised to benefit from higher grain prices and the growing likelihood that the U.S. will need to plant another large corn and soybean crop in 2013.”

All this evidently bodes well for potash companies. Today, the MiningFeeds Potash Index is the only mining stock index in the green, up 0.25% at publication time.

Shares of Agrium (Stock Profile – TSX:AGU & NYSE:AGU) have moved higher this week. On Wednesday, the company increased their estimates for the second quarter: earnings are now expected to be in the range of $5.40 to $5.50 per share. “The increase in expected earnings is due to excellent results across our entire crop input business, resulting from the continuation of robust demand through June,” said Mike Wilson, Agrium President and CEO.

And shares of the world’s leading potash producer, Potash Corp. (Stock Profile – TSX: POT & NYSE: POT), have also been edging higher. The company is scheduled to release their second quarter 2012 earnings on Thursday, July 26 at 6 am ET. Based in Saskatchewan, Potash Corp. is responsible for about 20 percent of global potash supply.

For the related article: 5 Potash Stocks to Watch – CLICK HERE.

NEWS RELEASE.

July 18, 2012: Vancouver, B.C. – MAG Silver Corp. (Stock Profile – TSX:MAG & NYSE MKT:MVG) announced that exploration drill hole CM12-431 has intersected four distinct, closely spaced zones of massive sulphides ranging from 3.1 metres to 61.6 metres in thickness. These new discovery intercepts were drilled approximately 225 metres beneath the strongest mineralization previously drilled in the “Jose Manto-Bridge Zone” and show all of the hallmarks of the near-source part of the Carbonate Replacement Deposit (“CRD”) system that MAG has been systematically seeking at Cinco de Mayo. The mineralization in the upper intercept of Hole CM12-431 is likely connected to the 4 kilometre long Bridge Zone-Jose Manto where high grade mineralization of lead, zinc and silver has previously been drilled.

“This is a real victory for our systematic exploration methodology and we are very pleased to deliver another discovery of this magnitude to our shareholders, this time 100% owned. Hole 431 has cut by far the strongest mineralization yet seen at Cinco de Mayo,” said Dan MacInnis, MAG Silver President and CEO. “The size and geological characteristics we see are the kind of major mineralization centre/source we have long expected at Cinco de Mayo, and it is open in all directions.”

For a table featuring the complete results – CLICK HERE.

CompanyFeed™

NEWS RELEASE.

July 12, 2012: Vancouver, BC – Balmoral Resources Ltd. (Stock Profile – TSXV:BAR & OTCQX:BALMF) announced results from six holes completed on the Company’s Northshore Property, located in the Hemlo-Schreiber Gold Belt of Ontario.

Broad intervals of gold mineralization were intersected in all six holes. With today’s results gold mineralization associated with the Afric Zone has now been intersected for over 280 metres in an east-west direction, to a vertical depth of over 300 metres and for up to 200 metres in a north-south direction. The gold mineralized corridor, as defined by drilling to date, remains open to the east, west, north and to depth.

Results were highlighted by intercepts of 143.00 metres grading 0.90 g/t gold (hole WB-12-15), 90.50 metres grading 1.09 g/t gold (WB-12-18) and 28.00 metres grading 1.10 g/t gold in hole WB-12-20.

To review the drill results – CLICK HERE.

CompanyFeed™

NEWS RELEASE.

July 11, 2012: Vancouver, B.C. – Oracle Mining Corp. (Stock Profile – TSX:OMN & OTCQX:OMCCF) announced that Oracle Ridge Mining LLC (“ORM”), a wholly owned subsidiary of the Corporation, has signed a Memorandum of Understanding (“MOU”) with Pima County in Arizona for the development of the Oracle Ridge Copper Mine located in the County.

Yesterday, the County Board of Supervisors unanimously approved a resolution in support of ORM’s proposal to re-open the Oracle Ridge Copper Mine, as well as approved and ratified the MOU between Pima County and ORM. The county has previously supported ORM’s Air Permit and domestic wastewater treatment plan.

“Pima County is a key partner in the return of the mine into operation, and we are pleased to formalize our established, cooperative approach through the signing of an MOU on the Oracle Ridge Copper Mine project,” said Mr. Doug Nicholson, Oracle Mining’s CEO.

To learn more – CLICK HERE.

CompanyFeed™

Only you can decide the level of risk you can tolerate and how much patience you have to sit while developments, the story, plays out.

The most upside (and by far the greatest risk) comes from buying a junior when they are exploring and make an initial discovery. Great drill assay results can send a juniors share price skyrocketing. The reverse can also be true. Junior explorers, the green field plays, are the riskiest plays by far. Strike out on assay results and it could be goodbye to a share price rise for a very long time – till the company finds another project they can work on. If you’re buying into this kind of play make sure the company has another fallback project in its portfolio.

My favorite stage junior is a junior in the post discovery resource definition stage (also known as brown field stage companies). These companies have all ready found something, the share price has settled back after the initial discovery and the company is going in to see what they have and hopefully produce a 43-101 compliant resource estimate and build upon it. The risk has been greatly reduced, the waiting time for a discovery non-existent and the reward very nice considering the much lower amount of risk.

For nearer term producers – for those further down the development path towards a mine – you have:

• Preliminary Economic Assessment (PEA) or scoping studies are done to examine potential mining scenarios and economic parameters – A PEA or scoping study is an important milestone for a mineral project, it’s the first step in a company’s  economic and technical examination of a proposed mine

• Preliminary feasibility studies or pre-feasibility studies are more detailed than PEA’s and are used to determine whether or not to proceed with a detailed feasibility study. They are also used as a reality check to determine areas within the project that require more attention

• Feasibility studies will determine definitively whether or not to proceed with the project. A feasibility study or bankable feasibility provides budget figures for the project and will be the basis for raising capital to build the mine

Remember all these different stage studies are only yes/no decisions on whether to move to the next stage. NONE of them mean you are going mining, there’s no mine till every stage is completed, permits approved and the necessary financing has been arranged.

Because these companies are well advanced along the development path a lot of the guesswork about grade, size, costs and metallurgy have been taken out of the equation for us. They have done sufficient work to give investors a certain level of confidence that their project will successfully move towards being a mine.

The later stage companies (those doing feasibility, permitting and money raising) can have an excellent entry point for investors – they often enter a quiet period when they are doing the advanced studies and raising money to go into production. They often base (a flat share price) for quite a while through this period – possibly a good time for accumulation of their shares if you believe in the story. After the money is raised for production investors can see they are going mining – cash flow is just over the horizon – and the share price will often break out of its trading range.

With producers you have to look at the balance sheet, consider their plans for the future and judge for yourself the ability to meet those plans.

Remember cash flow is king, but can they grow that cash flow? These large well established producers have the least risk and the least upside. But gains could be steady and maybe they pay a dividend.

NEWS RELEASE.

July 4, 2012: Montreal, Quebec – Stornoway Diamond Corp. (Stock Profile – TSX: SWY) reported it has executed a Declaration of Partnership (the “Declaration”) with the communities of Chibougamau and Chapais in the James Bay Region of Québec. The Declaration is a statement of cooperation between the partners for the responsible development of Stornoway’s 100% owned Renard Diamond Project based on the principles of environmental protection, social responsibility and economic efficiency. The Declaration was signed in Chibougamau on July 5th by Mme. Manon Cyr, Mayor of Chibougamau, M. Steve Gamache, Mayor of Chapais, and M. Patrick Godin, Chief Operating Officer of Stornoway.

The Declaration provides for the creation of a Renard Liaison Committee that will address issues of mutual interest such as communication, employment, and the economic diversification of local communities. In particular, the committee will oversee initiatives to attract and retain new residents to the towns of Chibougamau and Chapais.

Matt Manson, Stornoway’s President and CEO, stated: ”The Declaration of Partnership with Chibougamau and Chapais is a further example of the framework of trust, transparency and cooperation with which we seek to develop Québec’s first diamond mine. It follows the execution of the Mecheshoo Agreement with the Crees of the James Bay Region in March, which was established on similar principles. For Stornoway, the Declaration is an expression of the importance we place on Chibougamau and Chapais as commercial centers, and future civic partners, for the successful development of Renard.”

To learn more – CLICK HERE.

CompanyFeed™

NEWS RELEASE.

July 5, 2012: Vancouver, B.C. – Oracle Mining Corp. (Stock Profile – TSX:OMN & OTCQX:OMCCF) announced its Oracle Ridge Copper Mine project near Tucson, Arizona received its Class II Air Quality Operating Permit from the Pima County Department of Environmental Quality (“PDEQ”) on July 3, 2012 (the “Air Permit”).

The Air Permit is the first new mine Air Quality Operating Permit to be granted in Pima County in more than 11 years, and the only one issued under the current regulatory scheme.

“Receipt of the Air Permit for the Oracle Ridge Copper Mine project is a tremendous achievement for Oracle Mining and for our technical and consulting team,” said Mr. Doug Nicholson, Oracle Mining’s CEO.

“Oracle Mining would like to thank the entire team for their efforts but in particular to Tom Sheber, P.E., of Tetra Tech who developed the Air Permit application along with the extensive support team and other partners. Tetra Tech’s ability to complete the application with no technical deficiencies on the initial application review is rare and outstanding,” said Mr. Nicholson.

To learn more about the permitting – CLICK HERE.

CompanyFeed™

PRESS RELEASE.

July 4, 2012: Montreal, Quebec – Stornoway Diamond Corp. (Stock Profile – TSX: SWY) reports President and CEO, Matt Manson presented alongside many of the world’s publicly traded producing and development stage diamond mining companies at the annual RBC Diamond Conference in London, England.

A sound file of the presentation has been synced to the slides and posted on the internet. To view the presentation – CLICK HERE.

CompanyFeed™

NEWS RELEASE.

July 4, 2012: Montreal, Quebec – Stornoway Diamond Corp. (Stock Profile – TSX: SWY) reported that it received the results of a feasibility study on a 161kV powerline to supply grid power to the Renard Diamond Project, Stornoway’s 100% owned flagship asset located in north-central Québec.

The powerline study was conducted on behalf of Stornoway by Hydro-Québec, the provincially owned utility. Capital cost is estimated at $173.6 million for a 159 kilometer long line between Renard and the Laforge 1 hydro-electric generating station. The December 2011 Renard Project Feasibility Study contemplates on-site power generation using diesel fueled gensets, with a pre-production capital cost of C$802 million and an average operating cost of C$54.71/tonne. A powerline would represent additional capital cost to the project, but a potential saving in operating cost. Based on a Hydro-Québec tariff “L” of $0.0583/kWh, it is estimated that the operating cost savings would be approximately C$9/tonne based on the operating parameters contained within the Feasibility Study.

The Hydro-Québec powerline has been designed to support multiple users, including potential mine development projects located to the south of Renard. Hydro-Québec will require that Stornoway finance the powerline’s cost upfront, and have proposed a capital rebate should these other projects be connected in the future. On this basis, Stornoway estimates that the powerline as currently configured will yield only a marginal net economic benefit to the Renard Project over the initial 11 years of Mineral Reserve-based mine life, but will produce a more positive economic return over the longer mine life that would be achieved should the project’s total Mineral Resource be developed.

Consequently, Stornoway will not proceed with the powerline proposal as presented by Hydro-Québec, and will pursue the initial development of Renard based on the diesel fueled genset configuration contained within the Renard Feasibility Study. Stornoway will seek to develop a powerline to Renard on a more cost efficient basis as a second phase capital investment following the completion of mine construction, and based upon the future potential development of the project’s large Inferred Mineral Resource and exploration upside.

To read more – CLICK HERE.

CompanyFeed™

In 2011, restrictions on the availability of rare earth elements brought the term “critical minerals” into the headlines. The industrial world’s powers responded by filing a complaint with the World Trade Organization (WTO) against China’s export restrictions and duties on rare earth elements.

Did you know that tungsten was also on their hit list? And, did you know that tungsten was ranked ahead of rare earth elements on the British Geological Survey (BGS) annual mineral “risk list” in 2011? Warren Buffett evidently did which may explain his recent interest in tungsten.

Ranking fourth on the BGS’s risk list is tungsten. Tungsten is the hardest and strongest metal on the planet. It is over three times harder than chromium, cobalt and titanium and over five times harder than nickel, iron and platinum. Tungsten alloys well with other metals and it has the highest melting temperature of all metals and displays high resistance to corrosion.

The main use for tungsten is in the manufacture of cemented carbides or hard-metals, which make wear-resistant materials used in metal working, mining, petroleum and the construction industries. The steel sector is a primary consumer of tungsten for use in stainless and full alloy steels, and superalloys. It is also used in light bulbs and has various military, aviation and power generation applications.

China is the world’s largest producer of tungsten – supplying roughly 85% of the world’s demand. China also controls approximately 67% of world reserves with Russia and Canada ranking second and third. The global supply of tungsten metal is tight with just a few operating mines located outside of China. Very few new mines have opened in the past ten years. Recycling has filled the production gap increasing from 5% of the world’s supply to 35% over the past decade.

Over the next five years some think the global supply of tungsten will worsen. In part because secondary production from recycling is nearing maximum output. Furthermore, tungsten is not readily co-produced with other metals thus limiting its potential production.

A 2012 Market Research tungsten report notes, “Restricted by the limited new exploited resources and the policies concerning total exploration amount control and export quotas, China’s output of tungsten ores will witness little scope for growth in the coming years and the global tungsten market will present tight supply.”

The decision by the Chinese Government to introduce restrictions on the production and export of tungsten in order to conserve resources and meet increasing internal demand may have a major impact on the industry. Since 2010, the price of tungsten APT has moved from $200 to $400 per MTU.

Supply constraints could also be paired against increasing demand. International metals and minerals research firm Roskill says the outlook for the tungsten market is positive as they expect tungsten demand to increase at almost 6% per year to 2016, driven on by strong growth in China.

North American Tungsten (Stock Profile – TSXV:NTC & OTC:NATUF) is a leading junior tungsten producer. The company currently produces 4% of the world’s supply – half of which is exported to China. North American Tungsten has been producing tungsten from its Cantung mine in Canada’s Northwest Territories since 2001. The company has navigated two mine shutdowns and restarts and, during the most recently shutdown in 2010, upgraded the mine with a $25 million capital program. In addition to the Cantung mine, North American Tungsten owns the Mactung property which boasts one of the largest high-grade tungsten deposits in the world.

A relatively new tungsten player is Hunter Dickinson’s Northcliff Resources (TSX:NCF). In October 2010, Northcliff entered an agreement with Geodex Minerals (Stock Profile – TSXV:GXM) to acquired a 70% interest in the tungsten/molybdenum Sisson Project in New Brunswick, subject to investing up to $17 million in project development expenditures. The company has now completed the requirement and secured its 70% interest. Further to the initial agreement, Northcliff entered into a second agreement in May 2012 to acquire the remaining 30% interest from Geodex. According to the company, the Sisson Project has the potential to become an economically feasible low-grade open pit mine. The Feasibility Study is expected to be completed by the third quarter of this year.

Let’s not forget about the Oracle of Omaha, Warren Buffett. IMC Group, a subsidiary of Buffett’s Berkshire Hathaway (NYSE: BRK-A) that holds a diverse portfolio of metalworking companies, recently entered into a deal to invest $35 million in Woulfe Mining (Stock Profile – TSXV:WOF & OTC:WFEMF) for a 25% interest in their South Korean tungsten operations. In 2009, Woulfe acquired the past producing Sangdong mine in South Korea which has historically been one of the world’s top producing tungsten mines.

For a list of publicly traded mining companies with an interest in tungsten & tin – CLICK HERE.