Credit Suisse strategists claim that by 2015

pmcollectour

Credit suisse strategists claim that by they year 2015 the cost of producing one ounce of gold will be $1,400.00 US.
Does anyone know why the cost will increase from $600.00 US now to $1,400.00 US in five years ? TIA

jmski52

If the analysis is from Credit Suisse, I can only surmise that most of the increase in the cost will be from escalating prices.

derryb

Less gold per ton excavated due to depleting sources. PEAK GOLD is here?

roadrunner

The costs of mining gold have steadily increased over the past 2 years, effectively negating the price of gold increases that "should" have turned these miners very profitable. It's been almost the norm to see the better known miners have losing or below average quarters because they had poorly timed currency swaps, derivative bets, lowering ore grades, new projects behind schedule, losing permitting, suffering strikes, lack of electricity (South Africa), etc. The list is almost endless. There were far more disappointing 1st quarter gold mining reports than there were exciting ones.

Sources of continuing increasing costs (in no particular order):

-rising oil, electricity, commodity costs - some South African mines have trouble even keeping the lights on due to a poor electrical infrastructure in that region.
-increased taxes paid to sovereign nations and local jurisdictions. Australia's recent consideration of an additional 40% increase in mining taxes suggest that this trend will continue to squeeze the miners.
-new waves of green environmentalism can shutdown any mining operation in any jurisdiction. All the people or govt need to say is that they are harming the environment. And in many remote regions they are.
-increased royalty payments to the original deed holder
-mistiming local currency moves that raise the cost/oz to mine
-potential for nationalization or permit pulling if the locals get the notion that they want a bigger cut in today's world of dwindling natural resources
-labor strikes (common in South America and Africa)
-natural disasters (volcanoes, earthquakes, flooding, etc.)
-political posturing where the locals change their entire view of your operation in 24 hours. Either give them a bigger cut or shutdown.
-increased difficulty in finding gold. The South African miners have seen lowered production since 1970 and are miles deep now in trying to find gold. Besides the obvious safety aspect it's much more cost intensive. No one has yet found a way to turn seawater into gold. So miners are going miles deep and to mountain tops in frigid or humid environments to find gold.
-derivatives buried into the original non-recourse loan agreements that ultimately give the power to the banks rather than the mining companies. At the first slip up, the bank owns the operation at pennies on the dollar.
-lack of funding or sponsers - esp. for smaller operations.
-because the larger gold miners are seeing their inventories fall they need ways to replace it or eventually go out of business. Hence these guys are taking more chances and making riskier deals than they would have 5-10 yrs ago. Every potential resource that ends up being a goose egg hurts the bottom line. In any event each viable mining operation has to continue to explore and find more gold, regardless of how much it costs. The only other choice is to acquire other quality operations/mines already in progress.
-projected ore grades falling off
-physical gold prices falling off because of overtrading of paper gold.
-cost to service debts become oppressive.

If mining were as simple as how many tons of rock were extracted and constant recovery rates with static ore grades they'd all make money hand over fist. Today's "all-in" costs after taxes and amoritization is probably averaging around $600-$750 per gold mining operation. Many of the larger miners carry large debt loads. With gold at $1100-$1200 per ounce a lot of the larger miners are making no more and often less money than when gold was at $800.

roadrunner

Buffalode

This report gives some information on costs and trends:

VM Group Report

edmundfitzgerald

Tuesday, May 18, 2010

Dow Jones Newswires Of DOW JONES NEWSWIRES

LIMA -(Dow Jones)- A number of major gold-mining companies are planning to continue exploring, to start new mines or to expand existing projects in Peru.

Company executives with U.S.-based Newmont Mining Corp. (NEM: 54.08, -0.24, -0.44%), Canada's Barrick Gold Corp. (ABX: 41.4, -0.9, -2.13%) and South Africa's Gold Fields Ltd. (GFI: 13.19, -0.38, -2.8%) said at a mining conference in Lima that they plan to continue investing in Peru, the world's sixth-largest gold miner.

Barrick Executive Vice President Peter Kinver said the company hopes to be able to extend the life of its Lagunas Norte mine, by mining sulphide deposits beneath the oxide ore.

Lagunas Norte produced one million ounces of gold in 2009 at a total cash cost of $138 an ounce.

Barrick also has had an active exploration program underway, Kinver said.

Gold Fields chief executive Nicholas Holland said exploration is underway to find more gold around its Cerro Corona mine, which is set to produce some 400,000 ounces of gold this year, with cash costs of about $300 an ounce.

"Over the next three to five years, we are set to become a much more significant producer in Peru," Holland said, adding that the company's goal is to produce 1.0 million ounces of gold in Peru a year.

Holland said the challenge is to covert as much of the resources into reserves as possible, extending the mine life at Cerro Corona.

The company is also optimistic about its Chucapaca project in southern Peru, where construction could start within 2 1/2 to three years.

Newmont, which has a majority stake in the Yanacocha mine, is on track to produce in Peru from 750,000 ounces to 810,000 ounces of gold at a cash cost of from $360 an ounce to $400 an ounce, said Guy Lansdown, company executive vice-president.

The company continues to explore at Yanacocha, where it produced its first gold in 1993, and where Compania de Minas Buenaventura SAA (BVN: 36.34, -0.34, -0.93%) is the main minority partner.

Lansdown said the Minas Conga project has the potential to produce 650,000 ounces to 700,000 ounces of gold a year, with cash costs of $300 an ounce to $400 an ounce, and to also produce quantities of copper.

He said the project is in its basic engineering stage and is expected to be running by late 2014 or 2015. Buenaventura is also a partner in the Minas Conga project.

Lansdown added that the company is exploring in southern Peru.

"The investment climate is favorable and it is competitive," he said. "The key is maintain and improve it."

Copyright © 2009 Dow Jones Newswires

CoinMiner1

Two of the four largest precious metal producers in the world, Australia and Nevada, are both set to dramatically raise taxes on miners. Once this starts, it doesn't stop.

In addition to what Roadrunner pointed out, water and socio-economic costs have risen - and are forecast to rise - substantially. Water problems in Australia are especially acute. The situation in China and Nevada are also challenging.

Managing water has always vexed mining engineers, look at some of the issues in South Africa and the Comstock Lode for examples.