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Is cash the mining industry’s most important resource?

The old adage that cash is king is perhaps most true in the resource sector, especially among early stage exploration and development companies. Far from being able to rely on earnings from production, these firms need to raise capital to do more than keep the lights on. Funding is needed for the core elements of the business: geology, discovery, analysis and building. Without adequate funding, a company’s progress can be halted, sometimes for months or years.

Smirnova, who is senior portfolio manager and chief investment officer at Sprott Asset Management, identified three key elements she evaluates when examining companies in the resource sector.

“The first is the people. What’s the team? Have they done this before? What is the knowledge they have? Number two is the asset — the geology and location — and number three is the financial situation of the company,” she said.

Smirnova emphasized that while a company’s personnel and financial position can be altered, geology remains unchangeable. This has prompted her to adopt a more holistic approach when analyzing opportunities in the mining sector. She wants to see key elements utilized efficiently, including the strategic management of cashflow.

“Cash is important because you have to do things as a company. You want to discover the resource, and you want to move it towards production, but people definitely optimize that process,” Smirnova said.

Woodyer Sherron, who is president and CEO of Empress Royalty (TSXV:EMPR,OTCQX:EMPYF), echoed this point.

“You need cash. Without cash, a company is constrained. It’s difficult to move forward, so absolutely I think cash is the most important resource,” she told the audience at VRIC.

When asked if there is a minimum level of capital that would define a productive raise versus a non-productive raise, Woodyer Sherron suggested this is dependent on the stage of the company.

“There are so many different aspects to money, whether it’s exploration, development, production,’ she said.

‘From Empress’ point of view, we invest $5 million to $10 million into companies, but we focus on ones that are producing. They’re going to bring immediate cash,’ added Woodyer Sherron.

Kiernan, who is founder and principal at Bellevue Strategic Advisory, and Rule, the proprietor of Rule Investment Media, said money is important for mining companies, but not as important as leadership.

Rule has frequently said that people are the most important part of a company, but has also acknowledged that cash may be the most underrated asset. Drawing from his extensive experience in the resource sector, he noted that retail investors get excited about stories, not cash, and companies worry about the cost of capital inside the industry.

“They say the cost of capital is extraordinary. Have you ever considered the cost of not having capital? This is a capital-intensive business. If you don’t have capital, you have no business. So I think cash, it’s not exciting, but if you don’t have cash, you eliminate your ability to cause things to occur,” he said.

4 ways mining companies raise money

Mining companies raise capital through four primary methods, each with its own advantages and challenges.

Equity raises are a common approach in the industry, especially among early stage exploration and development companies. These agreements involve companies raising capital through the selling of shares.

This approach can be easy for those with compelling projects, good locations or favorable early exploration results. However, it can also dilute overall value for existing shareholders.

Equity raises can also be sensitive to overall market conditions. With that in mind, Smirnova spoke to the benefits of “raising when the ducks are quacking’ — in other words, raising cash when conditions are favorable. This approach can ensure that funds are available when needed, even if the market enters into a downturn.

Debt financing is a less common fundraising method in mining. Rule has extensive experience in this area.

He told the VRIC audience that during his time in the industry he’s overseen many deals. He explained that debt structures have their uses, but aren’t widely used due to their capital-intensive nature.

Debt structures often involve secured loans that are leveraged against company assets. They can be attractive because companies can raise capital rapidly, but they risk becoming overextended and losing valuable assets.

For Rule, debt financing is always a win for the issuer, but not always for the company.

“I can take a lower internal rate of return than I would ask for as an equity holder, because, by the nature of the transaction, it’s a secured loan. At the end of the exercise, whether I want it or not, the assets are mine, not theirs, and my coupon, assuming that I get paid, reduces my risk and allows me to recycle the cash,” he said.

Royalty and streaming agreements, like those offered by Woodyer Sherron’s company Empress Royalty, are an alternative to traditional equity and debt. In these types of agreements, companies receive upfront cash in exchange for a percentage of future revenue or production, often at a discount.

“We’re not buying third-party existing units, and we’re able to provide directly to them the financing they need … it’s less diluted than equity, it’s less restrictive than debt,” Woodyer Sherron said.

“We really want that revenue to come in so that we can reinvest it,” she added, emphasizing that Empress is interested in later-stage assets that are producing cash or close to doing so in order to ensure a steady revenue stream.

One final method of funding projects in the mining industry is joint ventures.

Similar to a merger, a joint venture involves two or more companies coming together. The advantage is that larger companies can provide reliable financing and expertise to move a project forward. However, joint ventures can also be highly complex, with differing views on ownership stakes and responsibilities.

“They’re very expensive and complex to negotiate, and they’re very expensive and complex to administer; if a joint venture goes bad, you’re in a problem where you have to unwind. You’ve got all kinds of conflicts, maybe with a much larger counterparty,” said Kiernan, who is an independent director for various mining companies, including Empress.

She also indicated that there are several reasons for joint ventures. Smaller companies get more experienced partners, while larger companies use them to gain access to jurisdictions by partnering with locals.

“There are going to be very big wins when they’re done for the right reasons and the proper diligence,” Kiernan added.

What should investors look for when it comes to cash?

In closing, the panelists offered final advice on evaluating companies based on their cash handling.

“Look at the ownership that the management team has in their own stock,” Smirnova advised.

“That will help you assess whether they’re in it just for a paycheck or for long-term value … that’s something we look for more and more. Question management teams to make sure that they actually have skin in the game.’

Rule offered advice that went beyond how companies use cash, suggesting that investors put their cash to work. He noted that with positive interest rates and deteriorating purchasing power, “cash is costing you money.”

‘Cash gives you the ability to take advantage of the illiquidity of others rather than being taken advantage of yourself,’ he said. Rule also noted that investors should get to know companies before they part with cash.

“I believe that 85 percent of the juniors that are listed on a global basis are valueless. I believe they’re worth nothing, and so I believe the junior sector is perpetually overvalued … if you learn to separate the 10 percent from the 90 percent, this is actually a hell of a sector. If you don’t, good luck to you,” Rule said.

Chart via the WGC.

Twenty-nine percent of the WGC’s survey respondents indicated plans to grow their gold reserves, up 5 percent from the previous year. Three percent reported their institution is planning to decrease its gold holdings, which was unchanged from the previous year.

The WGC believes that central bank gold purchases will continue to be a major driver of gold demand in 2025.

1. United States

Gold reserves: 8,133.46 metric tons

When it comes to the largest gold depository in the world, the American central bank is number one with 8,133.46 metric tons.

A large percentage of US gold is held in “deep storage” in Denver, Fort Knox and West Point. As the US Treasury explains, deep storage is “that portion of the US Government-owned gold bullion reserve which the Mint secures in sealed vaults that are examined annually by the Treasury Department’s Office of the Inspector General and consists primarily of gold bars.”

The rest of US-owned reserves are held as working stock, which the country’s mint uses as raw material to mint congressionally authorized coins.

2. Germany

Gold Reserves: 3,351.53 metric tons

The Bundesbank, Germany’s central bank, currently owns 3,351.53 metric tons of gold. Like many of the central banks on this list, the German national bank stores over half of its stock in foreign locations in New York, London and France.

The Bundesbank’s foreign gold reserves came into question in 2012, when the German Federal Court of Auditors, the Bundesrechnungshof, was openly critical of the Bundesbank’s gold auditing.

In response, the German bank issued a public statement defending the security of foreign banks. Privately, the Bundesbank then began the arduous process of repatriating its gold stock back to German soil. By 2016, more than 583 MT of gold had been transferred back to Germany.

Nearly half of Germany’s gold holdings are stored in Frankfurt, while more than a third are in New York, an eighth of its holdings are in London, and a miniscule amount are held in in Paris.

3. Italy

Gold Reserves: 2,451.84 metric tons

Banca d’Italia, the national bank of Italy, began amassing its gold in 1893, when three separate financial institutions merged into one. From there, its 78 MT slowly grew into the 2,451.84 MT the country now owns.

Like Germany, Italy stores parts of its reserves offshore. In total, 141.2 MT are located in the UK, 149.3 are in Switzerland and 1,061 are kept in the US Federal Reserve. Italy houses 1,100 MT of gold domestically.

4. France

Gold Reserves: 2,437 metric tons

The Banque de France has 2,437 MT of gold reserves, all of which it keeps on hand. The precious metal is stored in the bank’s secure underground vault, dubbed La Souterraine, which is located 27 meters below street level.

La Souterraine’s gold vaults are one of the four designated gold depositories of the International Monetary Fund.

According to Investopedia, the collapse of the Bretton Woods gold standard system was in part due to former French President Charles de Gaulle, who “called the U.S. bluff and began actually trading dollars in for gold from the Fort Knox reserves.” At the time, US President Richard Nixon “was forced to take the U.S. off the gold standard, ending the dollar’s automatic convertibility into gold.”

5. Russia

Gold Reserves: 2,332.74 metric tons*

The Bank of Russia is the official central bank of the Russian Federation and owns 2,332.74 MT of gold. Like France, Russia’s central bank has opted to store all its physical gold domestically. The Bank of Russia stores two-thirds of its gold reserves in a bank building in Moscow, and the remaining one-third in Saint Petersburg.

The majority of the yellow metal is in the form of large, variable-weight standard gold bars weighing between 10 and 14 kilograms. There are also smaller bars on site weighing as much as 1 kilogram each.

Russia, which is the second largest gold producer by country, has been a steady purchaser of the precious metal since roughly 2007, with sales ramping up significantly between 2015 and 2020. However, Russia’s refineries were banned from selling gold bullion into the London market following the country’s invasion of Ukraine. Sanctions by the west also include a freeze on about half of Russia’s gold reserves.

In early 2022, Russia tied its currency, the ruble, to the yellow metal. ‘The plan was to shift the currency away from a pegged value and into the gold standard itself so the ruble would become a credible gold substitute at a fixed rate,’ according to Robert Huish, an Associate Professor in International Development Studies at Dalhousie University.

*This figure does not reflect year-end 2024, including the at least 3.1 MT purchased in 2024, per the WGC, which is awaiting further data to update the 2024 total.

6. China

Gold Reserves: 2,279.56 metric tons

The central bank for Mainland China is the People’s Bank of China (PBoC), located in Beijing. According to the WGC, the national financial institute stores 2,279.56 MT of gold, most which has been purchased since 2000. In 2001, the PBoC had 400 MT of gold in reserve, but in just a little more than two decades that total has climbed by 459 percent.

The PBoC issues the Panda gold coin, which was first created in 1982. The Panda coin is now one of the top five bullion coins issued by a central bank. It is among the ranks of the American Eagle, Canadian Maple Leaf, South African Krugerrand and Australian Gold Nugget.

The PBoC was one of the top gold buyers out the world’s central banks for 2024, purchasing another 44 MT of gold during the year. April 2024 marked the 18th consecutive month of gold buying for China’s central bank, which paused its purchases afterward until picking them up again in November.

7. Switzerland

Gold Reserves: 1,039.94 metric tons

Holding the seventh largest central bank gold reserves is the Swiss National Bank. Its 1,039.94 MT of gold are owned by the state of Switzerland, but the central bank manages and maintains the reserve.

After years of opaqueness regarding the country’s golden treasure trove, the Swiss Gold Initiative, or Save our Swiss Gold campaign, was launched in 2011.

The publicity culminated in a national referendum in 2014, asking citizens to vote on three proposals. The first was a mandate for all reserve gold to be held physically in Switzerland. The other two dealt with the central bank’s ability to sell its gold reserves, along with a decree that 20 percent of the Swiss bank’s assets be held in gold.

The referendum was unsuccessful, but did prompt the bank to be more transparent. In a 2013 release, the central bank reported that 70 percent of its gold reserve was held domestically, 20 percent was located at the Bank of England and 10 percent was stored with the Bank of Canada.

8. India

Gold Reserves: 876.18 metric tons

The Reserve Bank of India is another central bank that has fervently acted to increase its holdings in recent years. It began adding to its gold assets in 2017; however, the majority of its purchases have taken place in the past four years.

Strikingly, after India’s central bank purchased 16 MT of gold in 2023, the institution scooped up another 72 MT of the precious metal in 2024.

While more than half of its gold is held overseas in safe custody with the Bank of England and the Bank of International Settlements, about a third of its gold is held domestically. In June 2024, India repatriated 100 MT of gold from the United Kingdom. This was the first time since 1991 that the Reserve Bank of India moved its overseas gold holdings back home.

9. Japan

Gold Reserves: 845.97 metric tons

Public information about the Bank of Japan’s gold reserves is hard to come by. In 2000, the island nation was holding approximately 753 MT of the yellow metal. By 2004, the Bank of Japan’s gold store had grown to 765.2 MT, and remained at that level until March 2021, when the country purchased 80.76 MT of gold.

10. Netherlands

Gold Reserves: 612.45 metric tons

Rounding out this list of the top central bank gold reserves is the Dutch National Bank (DNB), the central bank of the Netherlands. Like Switzerland, the Dutch central bank stores as much as 38 percent of its gold in Canada’s national reserve. Another 31 percent, in the form of 15,000 gold bars, is held in a domestic vault, while the remaining 31 percent is located in New York’s Federal Reserve bank.

In a report, the DNB describes gold as the supreme safe-haven asset. “Central banks such as DNB have therefore traditionally had a lot of gold in stock. After all, gold is the ultimate nest egg: the trust anchor for the financial system,” it reads. “If the entire system collapses, the gold supply provides collateral to start over. Gold gives confidence in the strength of the central bank’s balance sheet. That gives a safe feeling.”

*11. International Monetary Fund

Gold Reserves: 2,814.1 metric tons

The gold reserve held by the International Monetary Fund is the third largest in terms of size. The large gold reserve was amassed primarily during the founding of the international organization in 1944.

In that inaugural year, it was decided that “25 percent of initial quota subscriptions and subsequent quota increases were to be paid in gold.”

Since 1944, the International Monetary Fund has added gold through the repayment of debts owed by member countries. Nations can also exchange gold for another member country’s currency.

1. China

Gold production: 380 metric tons

China was the world’s top gold mining country in 2024 with output of 380 metric tons. While China’s gold output peaked at 455 MT in 2016, it hasn’t dipped below 300 MT in more than a decade. This consistent production continues to ensure China’s status as the world’s top gold producer.

China’s gold mining industry is dominated by state-owned operators. Some of the largest companies include Zijin Mining Group (HKEX:2899), which owns the Shanxi mine, the largest gold mine in the Shanxi province. According to the most recent data from MDO, in 2023 the mine produced 125,000 ounces of gold.

Another of China’s largest companies is China Gold International Resources (TSX:CGG,HKEX:2099), which owns a 96.5 percent stake in the Chang Shan Hao gold mine located in Inner Mongolia. One of China’s largest gold mines, it’s estimated that production in 2024 was between 106,097 and 112,528 ounces.

China also hosts major gold-smelting operations. Its Belt and Road Initiative has resulted in Chinese companies exploring and developing sites elsewhere in Asia and Africa, subsequently sending raw resources back to China for refinement.

In addition to being the top producer of gold in 2024, China was one of the largest consumers of gold. According to data from the World Gold Council, consumers purchased 857.1 metric tons throughout the year. Meanwhile, China’s central bank was among the largest buyers of precious metal in 2024, adding 44 metric tons of gold to its coffers during the year to bring its official gold holdings to 2,280 metric tons.

2. Russia

Gold production: 310 metric tons

Gold production from Russia came in at 310 metric tons in 2024, the same as the prior year. The country’s output has risen fairly significantly since 2017, when it produced only 255 MT of gold.

The US Geological Survey states that Russian gold reserves stand at 12,000 MT, making it the second-largest country for reserves after Australia. However, despite high production and reserves, Russian gold has had problems reaching world markets since the country invaded Ukraine in February 2022. In response, Russian operators have sought out alternative markets, particularly the BRICS nations and other Asian countries like Kazakhstan.

Russia has several large gold mines, but none are more prolific than Polyus’ (MCX:PLZL) Olimpiada mine in the Ksasnoyarsk Krai region of Siberia. According to the company’s most recent data, the mine produced 1.5 million ounces in 2023.

3. Australia

Gold production: 290 metric tons

Australian gold production slightly decreased in 2024 to 290 metric tons, down from 296 metric tons the previous year.

Australia is home to several large gold mines, including Newmont’s (TSX:NGT,NYSE:NEM) Boddington and Cadia Valley, which produced 745,000 ounces and 597,000 respectively in 2023. It also hosts the Tropicana mine, a joint venture between AngloGold Ashanti (NYSE:AU) and Regis Resources (ASX:RRL,OTC Pink:RGRNF) that produced 437,000 ounces of gold.

Australia is one of the top gold producers and has one of the largest reserves, with an estimated 12,000 metric tons. These reserves, along with several other top producers, will ensure the country remains in the top 10 for years to come.

4. Canada

Gold production: 200 metric tons

In 2024, gold production in Canada totaled 200 metric tons, marking a slight uptick from the 198 metric tons recorded in 2023.

Ontario and Québec are the largest gold-producing provinces in the country; together, they represent more than 70 percent of Canada’s gold output. The Canadian government states that gold is the nation’s most valuable mined commodity, with domestic exports surging 35 percent in 2023 to reach a total of C$34.1 billion.

Canada has a number of very large gold mines, the largest of which is Agnico Eagle’s (TSX:AEM,NYSE:AEM) Canadian Malartic Complex in Québec. The mine produced 689,000 ounces of gold in 2023 and hosts proven and probable reserves of 7.92 million ounces.

Other notable gold mines in Canada include Agnico Eagle’s Detour Lake in Ontario, which produced 677,000 ounces in 2023, and its Meadowbank Complex in Nunavut, which produced 432,000 ounces.

5. United States

Gold production: 160 metric tons

The US produced 160 metric tons of gold in 2024, a drop from 170 metric tons produced in 2023. This continues a trend of production declines that started in 2017, when the US produced 237 MT of gold.

According to the US Geological Survey, the top state for production of the yellow metal was Nevada, which accounted for 70 percent of total domestic production, followed by Alaska with 16 percent. The top 26 operations in the country were responsible for 97 percent of American gold output in 2024.

An assessment of US gold resources shows that the country has approximately 33,000 MT of gold in identified and undiscovered resources. The US Geological Survey notes that close to a quarter of the gold in undiscovered resources can be found in copper porphyry deposits. Gold reserves in the US are estimated at 3,000 MT.

The largest gold mining assets in the United States are all owned by Nevada Gold Mines, a joint venture between Barrick Gold (TSX:ABX,NYSE:GOLD) and Newmont, and consist of Turquoise Ridge, the Cortez Complex and the Carlin Complex. Between them, the mines produced 2.82 million ounces of gold in 2023.

6. Kazakhstan

Gold production: 130 metric tons

Kazakhstan’s 2024 gold output of 130 metric tons represents continued growth in the country’s production of the yellow metal, up from just 69 MT produced in 2016. Kazakhstan’s largest gold-mining operation is the Altyntau Kokshetau mine, which is owned by mining giant Glencore (LSE:GLEN,OTC Pink:GLCNF).

In its 2024 production report, Glencore stated that it produced 603,000 ounces of gold across all its Kazakhstan assets, the majority of which came from the Altyntau Kokshetau mine.

In August 2023, Anglo-Russian company SolidCore Resources, formerly Polymetal International, one of Kazakhstan’s largest producers, delisted from the London Stock Exchange in a move geared at severing the link between its Kazakhstani and Russian subsidiaries; it did so in response to tensions resulting from Russia’s invasion of Ukraine. It remains listed on the Astana International Exchange in Kazakhstan.

In its FY2024 financial results, released on January 29, the company reported it produced 320,000 ounces of gold, a 1 percent increase over 2023. Its largest asset in the country is the Kyzyl mine, which hosts 2.2 million ounces of gold.

6. Mexico

Gold Production: 130 metric tons

Mexico’s gold production in 2024 came in at 130 metric tons, a marginal increase from 127 metric tons the previous year.

Mexico has a long history of gold mining; in fact, the Spanish colonization of Central America in the early and mid-1500s was largely targeting gold and silver. Today, Mexico is among the global leaders in gold production. Precious metals account for 50 percent of the country’s total metal output.

While much of Mexico’s gold mining is controlled by foreign entities, one of the largest operations, the Herradura mine, is owned by Mexico City-based Fresnillo (LSE:FRES,OTC Pink:FNLPF). Herradura produced 360,598 ounces of gold, or about 10.08 MT, in the company’s 2024 fiscal year. The mine represents more than half of Fresnillo’s gold production and generates about a quarter of the company’s total adjusted revenue.

6. Ghana

Gold production: 130 metric tons

West Africa has a rich history of gold production dating back hundreds of years. Ghana has been taking advantage of its resources and has seen steady production increases over the years going from 88 metric tons in 2015 to 130 metric tons in 2024.

Gold has become an important economic driver for the country. In 2023, gold exports accounted for 62.1 percent of Ghana’s total exports, adding US$580 million to the nation’s gross domestic product.

The country is home to several highly productive gold mines, including Newmont’s Ahafo South mine, which produced 581,000 ounces of gold in 2023, and Gold Fields (NYSE:GFI) Tarkwa mine with 551,000 ounces.

9. Uzbekistan

Gold Production: 120 metric tons

Uzbekistan produced 120 metric tons of gold in 2024, up from the 100 metric tons produced in 2023.

Operated by Navoi Mining and Metallurgical Company, Uzbekistan’s Muruntau gold mine is one of the largest gold operations in the world. Massive deposits of gold were first discovered at the site in the 1950s, and it still holds some of the largest reserves in the world at 4,500 MT. The discovery marked the beginning of gold mining in Uzbekistan. The mine produces more than 2.5 million ounces of gold per year and is expected to continue operating into the 2030s.

Following the fall of the Soviet Union in 1991, mining for the yellow metal fell to its all-time lows in the mid-1990s. In 2019, the country’s government announced renewed investment into development and exploration. While that hasn’t yet been reflected in its annual production, upgrades at Muruntau scheduled to be completed in 2026 are expected to increase its output from 38.5 million to 50 million metric tons of ore per year.

10. Indonesia

Gold Production: 100 metric tons

The mining industry is one of Indonesia’s most important sectors, and the country is among the world’s top producers of nickel, copper and gold. In 2024, Indonesia produced an estimated 100 metric tons of gold, on par with its 2023 production totals.

Indonesia is home to several significant gold operations. The largest of these is the Grasberg Mining District, a joint venture between Freeport-McMoRan (NYSE:FCX) and Indonesia’s state-owned Indonesia Asahan Aluminium. In 2024, the area produced 1.86 million ounces of gold, a decrease from the 1.98 million ounces produced in 2023, and it is estimated to have 23.9 million ounces in mineral reserves.

10. South Africa

Gold Production: 100 metric tons

In 2024, South African gold production came in at 100 metric tons, a small decline from 2023’s 104 metric tons. An estimated one-tenth of global gold reserves are located in the country, and its Witwatersrand Basin is one of the largest gold resources in the world.

Among the largest mining assets in the country are Gold Fields’ South Deep mine, which produced 322,000 ounces in 2023, and Sibanye-Stillwater’s (NYSE:SBSW,JSE:SSW) Driefontein mine, which produced 233,000 ounces.

South Africa has been a top gold producer for decades, but between 1980 and 2018 the nation’s gold output fell by 85 percent. In recent years, South Africa has been the site of conflicts between the Association of Mineworkers and Construction Union (AMCU) and gold producers in the area. The AMCU has held many protests and strikes at several gold and platinum mines in the hopes of garnering more wages and stopping any mergers that could cause job losses.

Additionally, in 2024 South Africa blockaded access to the Buffelsfontein gold mine west of Johannesburg, cutting off food and water in an attempt to force hundreds of miners to the surface.

Illegal mining accounts for 10 percent of South Africa’s total gold output. More than 30,000 illegal miners operate out of 6,000 abandoned mine shafts in the country.

10. Peru

Gold production: 100 metric tons

Peru is a mineral-rich country, known for deposits of copper, silver and gold. In 2024, Peru’s gold production was flat with the prior year’s, with 100 metric tons being extracted.

While Peru’s gold mines may not produce as much gold as some others on this list, some are still significant producers, including Newmont’s Yanacocha mine, which produced 276,000 ounces in 2023, and Pan American Silver’s (TSX:PAAS,NYSE:PAAS) Shahuindo mine, which produced 140,000 ounces.

Like South Africa, Peru has spent years working to crack down on illegal mining. While it has had some success, illegal gold operations account for roughly half of all gold produced in Peru. These operations have also wreaked havoc on vast swaths of the Amazon, as mercury used in the production of gold leaches into groundwater and soil.

There are also legal artisanal miners who oppose recent government action to regulate illegal operations. This culminated in a protest by thousands of miners who blockaded the center of Lima in November. Opponents of the new registry say it allows illegal miners to operate with impunity and exempts them from criminal liability.

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