How much is gold's real global production cost?

TreasureHunter

TreasureHunter

Well-Known Member
Hi,

I'm researching the production cost prices for a project.

I know gold's production cost varies from country to country, from mine to mine...

But how much is global production cost per ounce for 2012?

Is there any credible, official data anywhere?

Can anyone help? I'd thank you a million times :)
 
Not sure if the Gold Council published anything on this...

I need legitimate, credible, reliable sources... Blogs, news articles are everywhere.

I heard so many figures, but I think the "real" cost of production for 2013 should be somewhere in the 1,000 - 1,200 $ interval (USD, of course).

But more precisely where... that, I'm unsure.

US figures are more accurate. There even are some concrete figures about mines. There are some mines in Africa that actually product gold for 1,500 - 1,600 $ per ounce... Oh, my Lord!

I believe if gold gets too close or even hits production cost levels, it will start rising again... eventually. Perhaps not immediately.
 
I would say without a doubt Zerohedge currently is more credible than the worthless homo's at WGC.

( Apologies to any who are offended by the word homo )
 
It's interesting that 10 years ago when gold was around $400/oz miners seemed to be surviving just fine but now we hear that sub $1,200 miners will struggle to make ends meet. Have production costs really gone up 200% in 10 years ? Just sayin! :p
 
Matthew 26:14 said:
It's interesting that 10 years ago when gold was around $400/oz miners seemed to be surviving just fine but now we hear that sub $1,200 miners will struggle to make ends meet. Have production costs really gone up 200% in 10 years ? Just sayin! :p
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Yes they have !!!! You have to remember most mining is done in countries outside the US and ESP in developing countries lik SA, China, Indonesia. Official inflation is running at at least 10% or more per year. In so called "developed" countries like the US, Canada and Australia cost have skyrocketed mostly related to wages and regulation. In a business I am involved in regulation costs have increased by 500% (5x) over the past 10 years. This is not even a risky or dangerous operation like mining.
 
TreasureHunter said:
Hi,

I'm researching the production cost prices for a project.

I know gold's production cost varies from country to country, from mine to mine...

But how much is global production cost per ounce for 2012?

Is there any credible, official data anywhere?

Can anyone help? I'd thank you a million times :)
Click to expand...
you almost answered it yourself

take the most productive mines that produce the major part of global production
collect the data of the costs from them (and link each data so people could see where data comes from)
calculate the average
and your analysis will be the top ... even all those goldseek.bs.com cannot provide such thing even though they claim they keep their hands on pulse.

otherwise it is manipulation with the data that might be far from truth


mines that were productive at $400 enjoyed cheaper energy costs ...
mines that were productive at $400 enjoyed higher graded ore
both are not here anymore

gold as well as other resource are finite and with every year passing the cost of extraction will rise both dollar wise and energy wise (that's where EROI comes)


P.S. I stopped relying on any source as very few provide comprehensive analysis and turn out to be just pump up thing.
 
Well I remember in 2000 that unleaded in Melbourne first reached $1.00 a litre. Today some 13 years later it is about $1.40 a litre, that's a 40% increase over 13 years. Wages in Australia increase around 3% a year, so over the same time period something like 50% wage increase over the past 13 years.

So two main costs in mining, energy and labour have increase say 50% each over the past decade. 50% increase is far short of the 200% increase in the gold price (from $400 to $1,200).

These two costs give an indication that the gold price increase has far exceeded the cost of production increase.
 
Matthew 26:14 said:
It's interesting that 10 years ago when gold was around $400/oz miners seemed to be surviving just fine but now we hear that sub $1,200 miners will struggle to make ends meet. Have production costs really gone up 200% in 10 years ? Just sayin! :p
Click to expand...

Depends how you look at it.

A lot of the better ore grades have been eaten into since then so each new ounce costs relatively more to mine. For example, the difference between a 9.5g/t ore body and a 7.6g/t ore body is 20%.

7.6g/t might look pretty awesome, especially if you're only comparing it to other mines that are currently operating right now, but it's still 20% less than 9.5g/t, which might have been what the same mine was pulling out two or three years ago.

If you have to expend the same amount of money to get 20% less gold then you can either look at it as "costs have risen" or you can look at it as "output has fallen" but most people calculate it as higher costs. Presumably that's because business-types prefer metrics that make it easier to blame management ("ZOMG, costs are spiralling!") rather than accepting that Mother Nature's propensity to distribute high concentrations of gold throughout the earth's surface doesn't always fit in with the growth projections on their spreadsheets.

Basically, the good stuff is gone and miners are scrambling for the crumbs.
 
Matthew 26:14 said:
Well I remember in 2000 that unleaded in Melbourne first reached $1.00 a litre. Today some 13 years later it is about $1.40 a litre, that's a 40% increase over 13 years. Wages in Australia increase around 3% a year, so over the same time period something like 50% wage increase over the past 13 years.

So two main costs in mining, energy and labour have increase say 50% each over the past decade. 50% increase is far short of the 200% increase in the gold price (from $400 to $1,200).

These two costs give an indication that the gold price increase has far exceeded the cost of production increase.
Click to expand...

The mine i worked on (coal expansion) had the unions pushing for wage rises every six months for 5+ per cent. Off the top of my head the highest earner was the project manager - working a Sunday night shift he would pull $660/hr charge out. Labour costs have exploded in the mining industry in general. Far in excess of the median rise. This will change.
 
^ That would be an Australian mine. I doubt there would be such high wages in South Africa where 40% of all gold comes from for example.
 
Matthew 26:14 said:
It's interesting that 10 years ago when gold was around $400/oz miners seemed to be surviving just fine but now we hear that sub $1,200 miners will struggle to make ends meet. Have production costs really gone up 200% in 10 years ? Just sayin! :p
Click to expand...

Yes, it's a good point there! I was thinking about the same issue, contemplating, even... Gold costs have went up a lot!

It seems the gold production costs can mean a real bottom for gold... of course, it could dip a bit or even a lot, but for a while under this level.

I am putting the production cost interval at 1,000 - 1,200 $, but the strict production cost is as low as 700 and 900 $ in some mines.
A mine in Ghana requires 1,500+ $ investment to produce a single ounce! I wonder what that mine is doing right now... they must be bankrupt or "on pause".

Gold production costs went up a lot during the past decade and I have also been wondering why...

*gold must be getting very rare: we must be nearing "peak gold" and almost no-one is screaming out loud about it... I suppose the grade of the deposits is getting worse and worse, so it costs more and more to exploit - more and more tons to dig out and "wash"?
*producers may artificially "pump up" production costs to make it seem very expensive - this way gold can sell at a higher price
*might also have something to do with energy getting more expensive in those respective areas where they're mining?
*wages for workers going higher? (a lot of those mines are in Africa, China, Peru, Chile... so the life standards might be improving and therefore they must pay more and more for the same work do get done?)
*some old sites of exploitation might have run out of gold, so new mines/new deposits are being exploited and the start is expensive

I'd like to see a full report, perhaps even some graphs on the evolution of the exploitation costs.

I find it strange that "pur production costs" are rather 700-800-900 $ in most cases, but the companies report full production costs (additional costs included) at around 1,100 $, rather... I wonder what those additional costs are?

What I've read so far was rather unconvincing... I suppose they pay taxes as well, transportation costs, security expenses etc.

But the "naked production" costs are rather between 700 and 900 $. North America and Europe being the cheapest, Africa and Asia more expensive, Australia in the middle...
 
I dont see why there has to be ANY gold mining for gold to hold its price or even fall. Yes you read that right. 80% of gold ever mined by humans is still in human hands, why must there be mining to keep the price from rising?

Comapnies dont increase their shares on offer (ie. quantity is fixed) and their prices go up and down, why should gold be any different?

If there are X tonnes of gold in human hands today and if that stockpile was not added to every again, why must the price rise? The only way the price would rise would be due to rising demand because supply would be fixed.

So that gets down to the crux of the matter, why would demand be rising in order to increase price?
 
Matthew 26:14 said:
Well I remember in 2000 that unleaded in Melbourne first reached $1.00 a litre. Today some 13 years later it is about $1.40 a litre, that's a 40% increase over 13 years. Wages in Australia increase around 3% a year, so over the same time period something like 50% wage increase over the past 13 years.

So two main costs in mining, energy and labour have increase say 50% each over the past decade. 50% increase is far short of the 200% increase in the gold price (from $400 to $1,200).

These two costs give an indication that the gold price increase has far exceeded the cost of production increase.
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You really are mixing up prices in different currencies here.
In 2000 when gold bottomed at around $250, the AUD also bottomed around 0.5, so gold in AUD was more like $500, not $400.

I remember oil also bottoming at some crazy price of $12 per barrel as well - it is now $95 per barrel.
That major increase in energy costs applies all over the world at every gold mine.
The price per litre you are quoting is mostly tax so gets confusing.


And with the China resources boom over the past 10 years, everything related to mining went up hugely as everybody involved cashed in - drillers, engineers, mine workers, accountants etc - you name it
The gold miners compete with all other mines for people and services so have to pay the going rate. Mine worker's wages certainly didn't just rise at only 3% per year.
So yes I would not be surprised if just about all costs in running a mine have tripled in 10 years.


And if you look up the supply and demand numbers for gold - over 60% of supply comes from mines - less than 40% from recycling existing material.
More than 50% of demand is still for jewellery.
Close all the mines for more than a few months and I guarantee you the price will certainly go up - at least to the point where people stop buying gold jewellery because it's way too expensive - but what price is that ???
Only a small part of the cost of a ring at a shop is the metal - the metal could still triple and the ring would not have to go up that much.
 
Earlier I tried underlining one key fact - gold may be getting overmined. It's getting rarer. Perhaps that's also part of the reason why its production costs have risen. Not sure, but I want to take this into account as well...

Right now I'm reading this book:

PeakEverythinglarge.jpg


There are some very interesting facts in it about how natural resources will peak/have peaked...

Gold is no exception. Like petrol, it will deplete. Of course - bullion and jewelry will preserve it. But if they mine less and less and that less is harder and harder to mine, then production costs increase, thus leading to a higher spot price as well...

Then there are ETF's... let's not forget.
 
TreasureHunter said:
Earlier I tried underlining one key fact - gold may be getting overmined. It's getting rarer. Perhaps that's also part of the reason why its production costs have risen. Not sure, but I want to take this into account as well...

Right now I'm reading this book:

http://wordpress.richardheinberg.com/wp-content/uploads/2010/04/PeakEverythinglarge.jpg

There are some very interesting facts in it about how natural resources will peak/have peaked...

Gold is no exception. Like petrol, it will deplete. Of course - bullion and jewelry will preserve it. But if they mine less and less and that less is harder and harder to mine, then production costs increase, thus leading to a higher spot price as well...

Then there are ETF's... let's not forget.
Click to expand...

Gold's depletion will take a long time, since about 80% of its use is for jewelry. I think there is a small amount of gold in each cell phone, about $.50 cents, and with a billion cell phones being produced every year, most of which isn't recycled...

Petrol's peak is probably here...if not past...at least the sweeeeet nectar crude that flows freely. Shale oil, fracking, etc increases production.

I'd be interested in the book...is it a good read?
 
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