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In 2024, higher-than-usual gold prices incentivized mining companies to diversify operations and acquire quality resources. Lower inflation has translated into a slight decrease in costs, further easing margins for mining companies in a high-price environment.
Overall annual demand (ex-OTC) for gold declined 3% year over year (y-o-y) to 3,259t in 9M24 as high prices deterred the momentum in central bank and jewelry purchases. The positive trend in investment demand, with geopolitical uncertainty and rate cuts, partially offset the dip in overall gold demand.1
Adopting advanced technologies across the gold mining value chain will drive cost reduction and improve operational effectiveness. Concurrently, establishing a sustainable profile will boost gold’s attractiveness as an investment option, reinforcing its appeal as a secure asset for investors.
Current focus of mining companies
Gold dominates budgets as the most explored commodity with 44% allocation even as the battery minerals share increases
The global gold exploration budget is estimated at US$5.6b in 2024, down 7% y-o-y, yet comprising 44% of the overall exploration budget.2 Mine site exploration continues to have the highest share — 46% within the budget — in line with the average allocation of 42% during 2019–23, compared to 35% allocation to late stage and feasibility and 19% to grassroot stage projects.3 The inclination toward mine site projects is driven by the goal to expand existing resources amid declining rates for new gold discoveries.
The budget share of junior gold mining companies in 2024 declined 13% compared to average budget of US$2.1b over 2019–23 with challenges in securing funds. While the budget share of major gold mining companies increased 14% compared to the average budget of US$2.7b over 2019-23.4
Regionally, Canada is estimated to record the highest share of 23% within gold budget in 2024, in line with its robust exploration efforts, followed by Latin America and Australia at 19% and 16%, respectively.5
Gold price rally buffered margins against easing yet elevated costs
Though the total cash cost (TCC) for gold decreased approximately 3% y-o-y in 2024 with the easing of inflation, the costs remain approximately 33% higher than the pre-pandemic costs in 20196. High costs for labor and consumables coupled with the strengthening of local currencies against the US dollar offset the impact of reducing inflation on operating costs.7
However, as the gold prices increased 23% y-o-y to US$2,386/oz in 2024, the high-price environment and the gradual decrease in costs eased margin pressure on gold mining companies and mitigated the need for high-cost mines to temporarily close or cut production rates.8