Rough gold, gold mine with rare golden stone

How gold miners can build long-term competitiveness

With price resurgence and forecasted demand for gold, mining companies are looking to increase production with sustainability in mind.

In brief

  • Gold miners are investing in exploration, M&A and sustainability initiatives.
  • In rethinking mining business models, responsible gold mining practices and green financing are top of mind.
  • Miners are looking to digitalization and electrification to drive resilience.

Authored by Dean Braunsteiner, Mining Assurance Leader, EY Canada.

Rising inflationary pressure and interest rate hikes across major markets are the key drivers for incremental investment flows in gold. The physical demand of jewellery grew 67%, and bar and coins increased by 31% year over year (YOY) as economies reopened and retail consumption gained traction during 2021.¹ On the flipside, gold exchange-traded fund (ETF) holdings, which are mainly for trading purposes, fell by 173 tonnes (t) in 2021, compared to a record 874t inflow in 2020, mainly due to tighter global monetary policies impacting opportunity cost of gold holdings.²

Gold price resurgence in 2020–21 combined with a strong demand outlook have led to advancement of key projects. Though prices have corrected from all-time highs in 2021, they are still holding above historical averages and are likely to incentivize additional capex in the short term. Expansions that were delayed due to the higher cost of operations and geopolitical uncertainty are expected to progress in 2023–24, with renewed focus of miners on project capital allocation.

Sustainability continues to be the top priority on miners’ agendas. Companies are investing to comply with ambitious environmental, social and governance (ESG) targets and stringent government regulations. Investments reveal that from 2018 to 2020, the value of total investments in assets under management (AUM) in major markets of Europe, the US, Japan, Canada, Australia and New Zealand grew by 15% to reach about US$35t, and 82% of those portfolios are based in European and US markets.³


Chapter 1

Current trends

Exploration, increased M&A, and ESG are top of mind for gold miners.

Exploration activities on the rise

The overall gold exploration budget reached US$6.2b in 2021, up 42% YOY and the highest growth since 2011.⁴ This is primarily due to high cash at disposal for miners, with record-high gold prices averaging US$1,798 per ounce (oz) in 2021, 21% higher than the usual incentive price of US$1,500/oz for new gold supply.⁵ Though overall reserves grew by only 1.9% to 54,000t in 2021, exploration activities are expected to add to the supply over coming years.⁶

Canada witnessed the highest rise in exploration budgets, up 85% YOY to US$1.5b. Over the past few years, exploration activities were more focused on mine site and late-stage projects in the region. However, in 2021, the highest growth in expenditure was observed in grassroot exploration, which grew 114% YOY to US$341m and is expected to add new resources.⁷

Increased M&A activities

Miners are also looking for M&A activities supported by strong prices and historically low debt levels due to higher cashflows. Deal announcements in 2021 were valued at US$23.7b.⁸ The most prominent announcement by value was the merger between Agnico Eagle Mines and Kirkland Lake Gold, creating one of largest global gold producers.⁹ Another major deal is the proposed acquisition of Yamana Gold by Pam American Silver and Agnico to leverage long-term value creation.¹⁰

Lack of new discoveries and margin protection have capped output growth and resulted in declining reserves over the last 10 years. In the last decade, only 25 new gold discoveries were made, which constituted only 7% of the gold discovered since 1990.¹¹ Asset scarcity and depleting reserves will result in further investments by miners to increase production capacities.

Focus on ESG initiatives

According to the 2021 EY business risk report, ESG and decarbonization remain the top two business risks for miners. Several major miners have set ambitious targets to achieve net zero emissions and are working across multiple areas. Sustainability analysis of major miners over the past year reveals that the key focus has been on climate change and sustainability along with community development.

Source: Company reports, EY Knowledge Analysis. Size of words is proportional to frequency of initiatives by miners.

Recycling gains traction

Despite reopening economies, recycled gold supply fell 11% YOY to 1,150t in 2021, with lower recycling volumes in both key regions: China and India.¹² However, demand is expected to recover as prices remain high while mine supply grows gradually.

With continued rise in demand, companies are trying to extract maximum value from new recycling techniques. For instance, the UK’s coin-producing organization Royal Mint plans to build a facility to extract gold from a technology that recovers 99% of precious metals from electronic waste.¹³


Chapter 2

Next steps

Miners are rethinking sustainability frameworks as they prepare for the future of the gold industry.

Rethinking business models and using green financing activities

Major miners have collaborated with the World Gold Council to come up with ESG principles to guide responsible gold mining (the Responsible Gold Mining Principles) and cover the following key areas:

  1. Environment: environmental stewardship, biodiversity, climate change, energy, land use, water use and mine closure
  2. Social: health and safety, human rights and conflict, labor rights, and working with communities
  3. Governance: ethical conduct and understanding the impact of gold mining and supply chain

The principles, created in collaboration with most of the major mining companies and released in 2019, are accompanied by guidelines that allow gold miners to provide assurance in each of these key areas.

Responsible Gold Mining Principles aim to achieve sustainable mining




  • Ethical conduct and compliance
  • Environmental stewardship
  • Biodiversity preservation
  • Mining companies
  • Supply chain partners
  • Investors
  • End consumers
  • Health and safety
  • Human rights and conflicts
  • Labor rights
  • Community engagement
Source: World Gold Council, EY Knowledge analysis

Rising investments and jewellery consumption support long-term demand

Gold is increasingly demonstrating importance through ETFs and physical assets in investment portfolios as investors look for relatively safer bids in an environment of uncertain macroeconomic conditions. Though ETF holdings fell by 173t in 2021, overall holdings remain above pre-pandemic levels. Consumer demand for jewellery has increased, especially in India and China, as economies recovered and lockdown restrictions eased. Industrial demand also rose, growing 9% YOY to 330t and is expected to grow further with technological applicability across vehicle electronics, communications infrastructure and autonomous systems.¹⁴

Demand from central banks

Between 2010 and 2021, China and Russia significantly increased reserves, growing 85% to 1,948t and 192% to 2,302t, respectively. Current geopolitical uncertainty has pushed reserve demand from emerging nations higher, with major purchases from Thailand (90.2t), Japan (80.76t) and India (77.45t)¹⁵ Central bank reserve demand might continue to grow as countries take steps to manage currency fluctuations and hedge against macroeconomic uncertainties.

Green financing alternatives to gain more traction

Global issuance of green, social, sustainability and sustainability-linked bonds grew 85% YOY to US$1.1t in 2021.¹⁶ Miners are also leveraging sustainability-associated bonds and ESG-focused ETFs in the market to finance specific projects or any corporate activity aimed at reaching ambitious emissions targets. For instance, Newmont introduced the mining industry’s first sustainability-linked bond, with net proceeds of US$992m focused on limiting carbon emissions and reaching gender parity in senior leadership positions.¹⁷ Green financing is expected to grow in the coming years as miners continue to seek funding opportunities for sustainability initiatives.


Chapter 3

What will drive business resilience?

Mining companies are looking toward digitalization and electrification to drive business going forward.

Digitalization and electrification unlock long-term value for miners

As gold demand grows, technological developments are expected to fuel the efficiency of mining operations. Innovation is required to allow already-known, lower-grade, complex ores to be mined both economically and in an environmentally sustainable manner.

Digitalization has the potential to unlock greater long-term value in mining operations through improved efficiency, decision-making and safety of operations. Miners are increasingly collaborating with mining equipment, technology and services (METS) companies to develop integrated and automated solutions by addressing challenges from construction to capital spending. For instance, Newcrest is working with Epiroc to provide automation at Cadia East underground mine, which will help to reduce hazard exposure rates compared to manual operators.¹⁸

Electrification can enable a shift to green energy consumption

Miners are adopting cleaner energy sources in fleets and embedding renewable technology to power mine site operations. By 2028, the market value of electric vehicles in global mining operations is expected to reach US$9b.¹⁹ In addition to reducing greenhouse gas emissions, electrification is critical in improving safety levels for employees, as it eliminates the noise, vibration, excess heat and exhaust gases, making for better working conditions at the mine sites.

Geopolitical uncertainties and illegal mining activities impact outputs in Africa and LatAm

Africa and Latin America (LatAm) collectively account for 42% of global gold mine production, so disruptions in operations can significantly impact competitiveness of gold. For instance, tax changes and local community protests in Peru can impact new project pipeline over the coming years.

Moreover, illegal mining activities in LatAm and Africa, mainly through artisanal and small-scale gold miners, continue to impact profitability of miners. In 2016, it was estimated that about 28% of gold mined in Peru, 31% in Bolivia, 77% in Ecuador, 80% in Colombia and 91% in Venezuela was produced illegally, which has only grown further with rising prices.²⁰ Along with the impact on margins, illegal activities are also impacting resources and the health and safety of employees due to non-standardized operational conditions. For instance, in Ghana 60% of its bodies of water are polluted largely due to illegal activities by small-scale miners.²¹


The gold market is expected to remain robust as it continues to gain traction as a financial hedging instrument against macroeconomic uncertainties. During the first half of 2022, gold demand was up 12% YOY to 2,189t, supported mainly by ETFs, and is likely to remain firm with inflation rates holding above historical averages despite tightening in monetary policies. Moreover, the geopolitical uncertainty building up due to the war in Ukraine is likely to increase investments in gold in the short and medium term.

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