Categories: General Market Commentary / Precious Metals
Topics: General Market Commentary / General Precious Metals

What Makes a World-class Gold Deposit?

With several hundred gold mines producing worldwide, almost every country is home to at least a few.

The world’s largest gold mine is Freeport-McMoRan’s (NYSE:FCX) Grasberg mine in Indonesia. Open-pit operations began in 1990, and even today the Grasberg minerals district remains an important source of gold. It still holds the world’s largest gold reserves, as well as one of the world’s largest reserves of copper.

But apart from size, what makes a world-class gold deposit? Various characteristics must be considered when determining the status of a gold deposit, including deposit type, average grade and mining and processing costs. Read on to learn more about those three factors and how they can be used to identify world-class gold deposits.

1. Type of deposit: Look for lode

Gold deposits are formed by a wide range of geological processes, and according to the US Geological Survey generally fall into two categories: lode deposits and placer deposits. Gold can be found in these deposits in a variety of forms, including nuggets, fine grains, flakes or microscopic particles. The metal is usually found alloyed to silver as electrum or with mercury as an amalgam.

Lode deposits are considered primary gold deposits because they are bedrock deposits that have not been moved. They come in a range of shapes and sizes — indeed, the US Geological Survey notes that they can “form tabular cross-cutting vein deposits but also take the forms of breccia zones, irregular replacement bodies, pipes, stockworks, and other shapes.”

Placer deposits are secondary deposits, and they are created when lode deposits are eroded and the gold in them is redeposited. Often alluvial processes are responsible for forming these deposits — running water will erode a lode deposit, and then the gold will fall from suspension as the water slows, creating placer deposits in places like the inside bends of rivers and creeks.

In the past placer deposits were important sources of gold, but today few economically important placer deposits remain in the word. The top gold deposits are now lode deposits.

2. Average grade: The higher the better (usually)

Ore grade refers to the proportion of gold contained in the ore of a particular mine and is represented in grams per tonne (g/t). Generally companies want to find deposits with higher grades as they contain more gold and will usually be more economic.

According to the World Gold Council, larger and better-quality underground mines contain around 8 to 10g/t gold, while marginal underground mines average around 4 to 6 g/t gold. Open-pit mines usually range from 1 g/t gold to 4 g/t gold, but can still be highly valuable.

3. Mining and processing costs: Keep them low

While looking at grade is important, it’s crucial to remember that even a high-grade gold deposit can be uneconomic if the gold it contains is too expensive to extract.

Placer gold deposits are generally easier and cheaper to extract gold from, but as mentioned above, few economic placer gold deposits remain today — those in existence are mostly low grade and not large enough to be viable. It is harder to extract gold from lode deposits as either open-pit or underground mining operations must be constructed, but as technology continues to advance companies are becoming better able to streamline operations and cut costs.

One increasingly important factor weighing on mining costs is that gold production is becoming more and more reliant on smaller operations rather than individual large-scale mines. This shift has raised development and operating costs in the gold industry as a whole.

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