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New rush for gold hits the world's mines. Prices, technology spur search, but South Africa clouds demand

By Staff writer of The Christian Science Monitor / October 14, 1986

Jamestown, Calif.

Sunlight glints off a nob of opaque rocks jutting above the tawny Sierra Nevada foothills. ``There, see it?'' asks Orville (Andy) Anderson, president of the Canadian-backed Sonora Gold Corporation, which is in the midst of heavy reserves. ``That bull quartz runs along the spine of the mother lode.''

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Behind him, a diesel engine groans. A huge steel-toothed maw scraps at the hillside, scooping up mounds of rocks and auburn earth filled with gold flecks too small to see. Nearby, some 500 hard hats scramble over the alloy skeleton of what is to be the largest processing plant in this country.

``We'll be pouring gold by January,'' Mr. Anderson says confidently.

This open-pit operation is projected to turn out 130,000 ounces of yellow metal annually, putting it among the larger producers in the United States.

But Sonora Gold is hardly alone. A dozen major mining operations are reawakening along the 120-mile-long geological fault that sparked the fabled Sutter's Mill rush in 1848. And even this activity is but a microcosm of what's happening worldwide.

From California to the Carolinas, some 45 mines will come on line this year. Gold production in the United States has tripled since 1980.

The estimated 3 million ounces dug up this year will be the highest yield since 1942, when most mines were closed by federal decree during World War II.

New technology, along with rising gold prices and the concurrent drop in other metal prices, has given mining companies a voracious appetite for gold.

``A number of [base metal] mining companies that have never been in gold are shifting into gold,'' says Marc D. Cohen, an analyst at Kidder, Peabody & Co. ``Others, with gold and other metals expertise, are shifting into gold alone.''

With exploration booming worldwide, many outfits are no longer content just to dig in their own backyards. Mining activity is exploding ``all along the Pacific Rim,'' says John Lucas, gold specialist at the US Bureau of Mines.

The big US producer, Homestake Mining, is angling for joint ventures in these locations.

``There are an awful lot more people out there looking now,'' a Homestake official says. ``So we're looking for opportunities to participate in these discoveries.''

New finds and old mines are being worked in places like Guadalcanal, Papua New Guinea, the Solomon Islands, the Philippines, and Indonesia.

South Africa remains far and away the top producer, with some 55 percent of the Western world's market share. The Soviet Union is a distant second. But the US, Canada, and Australia are coming on strong, as are Brazil, Colombia, and China.

In 1985, noncommunist world production rose to just over 1,200 metric tons, the highest level in 14 years, according to Consolidated Gold Fields, a London-based company. Net production over the next three years will go up by 200 to 230 metric tons, estimates Mr. Cohen at Kidder, Peabody.

Does that mean a glut is developing?

Hard to tell. The key is not so much the rise in supply but unpredictable demand. ``If demand for gold in electronics, coins, dentistry, and jewelry [accounting for roughly 80 percent of gold sales] stays the same,'' says Cohen, ``and there's no change in government stockpiles, growth in demand will be outstripped by production.''