Types of Gold Deposits
Gold is typically found in two primary deposit types: lode (primary) and placer (secondary). Understanding the differences between these deposits is essential for grasping the geological conditions that support gold mining.
Lode Deposits (Primary)
Lode deposits are formed when mineral-rich hydrothermal fluids move through cracks in the Earth’s crust, depositing gold in solid rock veins. These veins are often found alongside sulfide minerals like pyrite or quartz. Extracting gold from lode deposits requires either open-pit or underground hard rock mining techniques. Because the gold is locked within rock, it must be crushed and chemically treated to release the metal.
Lode deposits are typically high in grade but can be difficult and expensive to mine. Many of the world’s largest gold mines—such as those in South Africa, Nevada, and Australia—are based on lode deposits.
Placer Deposits (Secondary)
Placer deposits are created when gold erodes from primary sources and is transported by water, eventually settling in riverbeds, alluvial fans, or beaches. Due to its high density, gold accumulates in crevices and bends in stream channels. These deposits are typically mined using surface-level techniques such as:
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Panning: A manual method using a shallow pan to separate gold particles.
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Sluicing: A controlled water channel where sediment is washed through riffles that trap heavy particles.
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Dredging: Mechanical extraction of sediments from the bottoms of rivers or lakes.
Placer mining is less common in large-scale operations today but still plays a role in artisanal mining and early-stage exploration.
Modern Mining Methods
Once a gold deposit has been evaluated and development is complete, mining begins. The method used depends on the deposit’s location, depth, and geological conditions.
Open-Pit Mining
Open-pit mining is used when gold is found near the surface and spread across a large area. In this method:
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Massive amounts of overburden (soil and rock) are removed.
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Step-like benches are cut into the pit to provide access to ore at various depths.
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Explosives, loaders, and haul trucks are used to extract and transport ore.
This method allows for efficient recovery of large volumes of ore but produces significant waste rock and environmental impact.
Underground Mining
When gold is located deep below the surface, underground mining is necessary. Common techniques include:
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Room and Pillar: Mining out rooms while leaving pillars of ore to support the roof.
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Cut and Fill: Excavating horizontal slices, backfilling them with waste rock or cement as work progresses upward.
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Block Caving: Allowing gravity to collapse large sections of ore into collection tunnels.
Underground mining is far more expensive and hazardous than open-pit mining but is often the only option for high-grade deep deposits.
Artisanal and Small-Scale Mining
In many developing countries, small-scale gold mining is performed using basic tools and labor-intensive techniques. While it provides income for millions, it is often informal, under-regulated, and environmentally damaging due to mercury use and poor waste management.
Gold Processing and Extraction Techniques
Once the gold ore is removed from the earth, it undergoes several processing steps to separate gold from the host rock and other impurities.
Crushing and Grinding
First, the ore is transported to a processing facility where it is crushed and ground into fine particles. This mechanical process liberates gold particles from the surrounding rock, enabling the next stage—chemical separation.
Gravity Separation
In some cases, gravity-based methods can recover free-milling gold. Equipment such as shaking tables, spiral concentrators, or centrifugal bowls use density differences to isolate heavier gold particles.
However, most modern operations rely on chemical extraction for economic recovery rates.
Cyanidation
Cyanidation is the most widely used method for extracting gold from ore:
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Vat Leaching: Crushed high-grade ore is placed in large tanks where it’s soaked in a sodium cyanide solution, which dissolves gold.
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Heap Leaching: For lower-grade ore, crushed rock is piled on lined pads and sprayed repeatedly with cyanide solution over weeks or months.
The cyanide binds with gold to form a soluble complex. The gold-laden solution is collected and further processed to recover solid gold.
While highly effective, cyanidation requires careful management due to environmental concerns and potential for toxic spills.
Mercury Amalgamation (in Small-Scale Mining)
In artisanal mining, mercury is still used in some regions to bind with gold. The amalgam is then heated, evaporating the mercury and leaving behind gold. This method is inexpensive but poses severe health risks and contributes to global mercury pollution.
Refining: From Dore to Pure Gold
After extraction, the gold-rich material—called dore—still contains impurities such as silver, copper, and other metals. It must be refined before it can be sold or used in financial markets.
Miller Process
This industrial technique uses chlorine gas to remove base metals from molten gold. It’s fast and efficient but yields only 99.5% pure gold.
Wohlwill Process
This electrolytic process achieves 99.99% purity by dissolving gold in hydrochloric acid and using electrolysis to redeposit it onto cathodes. It’s slower and more expensive but necessary for investment-grade bullion and coinage.
After refining, the pure gold is cast into bars or coins—or held in storage by custodians offering digital ownership platforms.
Environmental and Economic Challenges
While gold mining remains a cornerstone of the global economy, it comes at a high cost—both financially and environmentally. The deeper we dig and the more scarce high-quality ore becomes, the more complex and resource-intensive the process grows.
Declining Ore Grades and Rising Costs
In the past, a mine might yield gold at concentrations of 10 grams per ton of ore. Today, many large operations extract gold from ore with concentrations as low as 1 gram per ton. To maintain output, companies must move more rock, use more chemicals, and process more material—raising both costs and environmental impact.
Some operations, like South Africa’s Mponeng mine, reach depths of over 2.5 miles, where temperatures exceed 130°F and safety becomes a significant engineering challenge. Drilling, ventilation, cooling, and hoisting costs can add hundreds of dollars per ounce of gold.
Across the industry, the all-in sustaining cost (AISC)—which includes direct production expenses plus ongoing capital and administrative costs—has steadily increased over the past decade. This narrows profit margins and puts pressure on miners to seek efficiency or pursue risky mergers and acquisitions.
Environmental Impact and Reclamation
Gold mining can have severe environmental consequences if not managed responsibly:
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Deforestation: Clearing land for open-pit mines displaces ecosystems.
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Water Pollution: Cyanide, mercury, arsenic, and acid mine drainage can contaminate local water supplies.
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Waste Management: One ton of ore may yield just a few grams of gold, leaving behind vast quantities of tailings—finely ground rock often stored in large dams that can rupture or leach toxic elements into the environment.
Modern regulations require mining companies to develop and fund reclamation plans to restore mined land. This includes reshaping the land, neutralizing toxic residues, replanting vegetation, and monitoring water quality. Still, enforcement and standards vary widely by country.
Investing in Gold Mining Stocks
One way investors gain exposure to gold without buying the physical metal is by purchasing shares in mining companies. These gold mining stocks offer potential upside beyond movements in the gold price due to operational leverage—but they also introduce a host of additional risks.
Potential Rewards
Gold miners can outperform gold itself during bull markets. For example:
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If a mine produces gold at $1,000/oz and gold rises from $1,200 to $1,400, profit margins grow from $200 to $400—doubling company earnings even though gold rose only ~17%.
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Mining companies may also discover new reserves, expand production, or benefit from improved extraction techniques that increase profitability.
Well-run firms like Newmont, Barrick, or Agnico Eagle often attract institutional investors seeking both gold exposure and equity-style returns.
Risks and Uncertainties
Mining stocks carry several risks not associated with physical gold:
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Reserve Estimation Errors: Projected resources are based on sample extrapolations and may be overly optimistic.
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Operational Disruptions: Labor strikes, weather events, mechanical failures, or geopolitical unrest can halt production.
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Cost Inflation: Rising energy, labor, or equipment prices can erode profit margins.
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Regulatory and Sovereign Risk: Mines in politically unstable regions may face sudden nationalization or license revocation.
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Dilution and Debt: Struggling firms may issue more shares or take on debt to stay afloat, eroding shareholder value.
For these reasons, mining stocks should be treated as equity investments with a high-risk profile, not a direct proxy for the price of gold.
The Decline of “Easy” Gold
The age of easily accessible gold is largely over. Many of the world's highest-grade deposits have already been mined, and replacing depleted reserves has proven difficult.
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From 1985 to 2005, global gold discoveries declined by over 30%.
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The number of large-scale discoveries (2+ million ounces) has dropped significantly.
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Exploration budgets have risen sharply, but success rates remain low.
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Regions with untapped deposits often lack infrastructure or carry high political risk.
Even China, the world’s top gold producer, faces looming resource depletion and has struggled to find replacement reserves fast enough. Meanwhile, former giants like South Africa have seen production fall by more than 50% since the 1990s.
Mergers and acquisitions are increasingly used to sustain production and market share. But as mining becomes costlier and riskier, investors are seeking alternatives that offer simpler, more direct exposure to gold.
The Rise of Digital and Vaulted Gold
In response to these challenges, a new form of gold ownership has emerged—digital vaulted gold. This approach allows investors to buy, store, and trade real gold online, without the friction of physical delivery or the complexities of mining stocks.
What Is Vaulted Digital Gold?
Vaulted digital gold platforms like OneGold give investors access to gold stored in secure, insured vaults operated by world-class custodians. You maintain full ownership of specific metal quantities, which are:
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100% physically backed and allocated in your name
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Stored in high-security facilities in locations like the U.S., Canada, or Switzerland
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Audited and insured, providing peace of mind
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Liquid, allowing you to buy or sell 24/7 online or via app
Unlike gold ETFs, which are shares in a trust, or mining stocks, which are corporate equities, vaulted digital gold offers direct exposure to the metal itself.
Why Investors Choose OneGold
OneGold, a partnership between APMEX and Sprott, was created to modernize the gold ownership experience. It combines the physical security of vaulted gold with the accessibility of a digital platform. Investors can:
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Purchase gold instantly with bank transfers, credit cards, or even cryptocurrencies
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Sell at any time or request physical delivery in coins or bars
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Benefit from tight spreads and low storage fees (as low as 0.12% for gold annually)
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Avoid the storage, insurance, and verification hassles of physical bullion at home
For those who want to benefit from the enduring value of gold—without the complications of mining stocks or the risks of home storage—OneGold offers a streamlined, secure, and scalable solution.
