Gold production in Mali is expected to fall by 8.3% this year, in what is a growing trend for many mines around the world, a trend that could have big implications for gold in the future. Mali is Africa’s third-largest gold producer, after South Africa and Ghana, and tenth largest in the world.

Overall, this year Mali expects to produce just 65.7 tonnes of gold, compared to 71.1 tonnes in 2019. By contrast, in 2018 its industrial gold production rose by 23%. The expected fall is despite previous efforts to improve mining methods in 2017, in which the government suspended small scale artisanal mining activities for three months.

As a result, today’s gold mining sector in Mali is dominated by major international consortiums. These include Barrick Gold, Resolute Mining, Anglogold Ashanti and B2Gold. Political tensions have long added to mining difficulties in Africa. For the past eight years, violent attacks by militants in northern and central Mali have killed thousands of soldiers and civilians.

Mali has also been hit by the coronavirus, though to date it has just over 2,000 reported cases and little more than 100 dead. Nevertheless, the temporary inability to refine the metal meant that those mining it - whether affected or not - couldn't sell and ship their goods away.

Africa Gold Mining Map

The fall in gold production is not ultimately a reflection of the pandemic or political unrest, but rather the depletion in its easily excavated gold reserves. It is estimated that the nation currently has around 800 tonnes of gold below ground. However, these reserves are becoming increasingly difficult to mine with any great viability. Ministry official Mamadou Sidibé told Reuters that Anglogold Ashanti’s Sadiola mine is nearing depletion. He expects it will produce just 832 kg this year compared with 4.6 tonnes in 2019.

The situation in Barrick’s Morila mine and Resolute’s Finkolo mine is very similar. Morila produced 3.5 tonnes in 2019 and now expects just 1.9 tonnes. The Finkolo mine is even worse, with 2019 seeing 6.6 tonnes produced, and now expects just 440 kg.

The large falls in production from these mines will be slightly mitigated by Resolute’s Syama and B2Gold’s Fekola mines, both of which hope to increase production. B2Gold’s Fekola mine has been an exceptional success; in 2018 it had all-in sustaining costs of just 533 US dollars per ounce. According to figures from Mining Intelligence, this was the world's seventh lowest.

The issue is that however efficient mines such as Fekola become, there is always a limit to the amount of gold that can ever be extracted from underground. All nations are slowly reaching that limit. Mali is therefore not alone in seeing falling production.

Australia, Russia and South Africa are estimated to have the largest un-excavated gold reserves remaining. Australia has around 10,000 tonnes, Russia 5,300 tonnes and South Africa 3,200 tonnes. Some experts believe we have already passed the highest point of global gold production. More optimistic estimates place this event within the next decade. After this point, referred to as 'peak gold', output will fall until all viable reserves are exhausted.

It is suggested that globally, gold mining could become economically unsustainable by 2050, past which gold mining will cease. This is however based on currently known underground reserves and existing mining technology.

S&P Global Market Intelligence has revealed that out of 278 deposits discovered between 1990 and 2019 there have been no major gold discoveries in the past three years. Further, there were only 25 in the whole of the past decade.

Production growth for most miners is therefore either declining or flat at best. Consequently, miners have opted for mergers and acquisitions as a means to drive growth. Currently Zijin Mining Group Co. Ltd. has a proposed takeover of Guyana Goldfields Inc. worth around £191,054,500. Shandong Gold Mining Co. Ltd. has bid for Cardinal Resources Ltd. plus a proposed takeover of TMAC Resources Inc.

With coronavirus restrictions and ongoing social distancing measures in place, some mines have already reported disruption to production in the past few months. This disruption will only serve to exacerbate the already reduced gold production expected for this year then, and as commodity driven by supply and demand, gold could see further price gains if production falls short of increasing demand in 2020 and beyond.