You can't mine for gold if you don't have any left to mine. That's a future giant gold miner Newmont Mining (NYSE:NEM) is looking directly in the face if it doesn't do something to change course. How bad is it? Gold still waiting to be mined at the company's operations peaked three years ago and has fallen dramatically since. What's going on and what's the company doing about it?

Going, going, gone ...
Newmont mines for a naturally occurring substance. There's only so much of it in the ground and only so much in any given spot. So, once the company sets up a mine and starts pulling gold out of the ground, the mine will only be productive for so long. Every ounce that gets produced is one less ounce Newmont has to mine in the future. This is called depletion.

Source: Charles Bayliss, via Wikimedia Commons.

Every miner has to deal with depletion. It's why Newmont and its peers are always on the lookout for expansion projects and new development sites. They have no choice. If they stop replacing the gold they mine, they'll slowly mine themselves out of business.

The best way to get a handle on how much gold a miner like Newmont has left is to examine its reserves. In Newmont's case, at the end of last year it had around 82 million ounces of gold that it believed it could profitably mine. It produced around 5.2 million ounces of gold last year. So, if you do the math and assume a relatively constant run rate, Newmont has around 15 years or so of gold left to mine. It isn't going out of business any time soon.

But a portion of Newmont's value is based on the gold it has left to mine. So even if it can mine itself dry of gold, the market will notice and drive its value lower as its gold slowly runs out. The reason this is an issue is because for the past two years Newmont's reserves have been falling.

The high water mark
In 2012, Newmont's gold reserves hit a peak of 99.2 million ounces. The following year that number fell to 88.4 million ounces. And last year it dropped again to 82.2 million. Over three years reserves fell 17% or so. That's a trend worth paying attention to.

To be fair, there are numerous factors that go into reserve figures. That includes how much gold Newmont mines, how much it adds in reserves via development or acquisition, how much it disposes of in asset sales, and the price of gold.

Gold Price in US Dollars data by YCharts

That last one is a bit difficult to deal with because gold prices can be highly volatile. But the basic idea is that elevated gold prices make it more economic to mine gold that would be unprofitable to mine if gold prices were low. And that's been an issue recently since gold prices have fallen from around $1,800 an ounce in 2011 to more recent prices in the $1,100 to $1,200 range.

To give an idea of the impact, between 2009 and 2011 (the recent high water mark for gold prices), Newmont added roughly 25 million ounces to its reserves because of gold price changes. In 2013, gold prices reduced reserves by around 2.5 million ounces, or about 2.5% of the previous year's gold reserves. However, between 2012 and 2014, gold prices reduced reserves by just one million ounces. So this isn't where all of Newmont's gold is going, though in any given year gold prices can have a notable impact on reserves.

So, where is the gold going?
Essentially, the bulk of Newmont's depletion is coming from mining. Last year it also sold assets holding around 2.6 million ounces of reserves, which didn't help matters. But the real issue is that Newmont is doing what it's meant to do, mine gold. But it hasn't been able to replace what it's been pulling out of the ground with acquisitions or development activities.

To be sure, there's no reason to worry right now. And Newmont is actively working on new projects that will help on this front. However, based on the recent downward trend and the relatively low price of gold, reserve depletion is an issue you should be keeping a close eye on.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.