Harmony Gold says all in production cost of gold now $1,200 to $1,250

TheBigB

I thought this article from Mineweb was interesting as most of us here think gold production costs are much lower.

Gold miners need gold above $1,650 to keep nose above water

Timbuk3

Interesting article, thanks for sharing !!!

Weiss

I disagree. I watch Gold Rush on Discovery. So I can tell you with some authority that it costs $15,000 to $20,000 to produce each ounce of gold.

sbeverly

I remember a few years back reading an article that stated that the mining costs per ounce were on average
about $400.

I imagine that due to fuel and other infrastructure costs that it would be higher now
but, an almost 3 X increase in costs seem high.

If this was always the cost for Harmony, I wonder how they made money with sub $1200 gold.

Baley

is this number intended to reflect the Marginal cost to produce an additional ounce, or the fully burdened "average" cost of production?

As Weiss points out, some operations cost more to produce than others

fivecents

<< <i>I disagree. I watch Gold Rush on Discovery. So I can tell you with some authority that it costs $15,000 to $20,000 to produce each ounce of gold. >>

I concur.

roadrunner

Published cash costs in quarterly reports are typically listed at $450-$875 per ounce. But there are some more challenging mines where the
numbers are even higher....or lower. But "cash costs" don't take into a lot of other costs that hit the bottom line. When you do that there
are a number of miners in the $800-$1200 range. Harmony if I recall has mines a few miles deep. It doesn't help that South African utilities
aren't the most reliable. Then factor in the unknowns (labor strikes, flooding, cave ins, fires, ore grade miscues, insurrections, permit revocation, share dilution,
increased royalties and taxes, currency and derivative risks, etc.) and costs can escalate quite rapidly into the red. Look at what happened to US silver
miner Hecla recently having first got a $250 MILL DEP judgement against them last year, and then this year with Mine Safety shutting down their Lucky
Friday mine for all of 2012 (15% of production) while they clean the walls of the 1 mile long main shaft. It ain't easy controlling costs in mining unless your company
has 6-12 mines or more evenly spread out in production. The bulk of the mining companies probably only have 1-3 producing mines, especially the juniors.
In Peru, Newmont and Buenaventura are trying to build the $4.5 BILL Conga mine but the locals have been protesting and striking. The mine is on hold. The
Pebble mine in Alaska (Northern Dynasty) has been around for >25 yrs but still no mine. It's one of the richest deposits currently known. But since it's located
near the coast line and major riverways, it's been a constant fight for each stage of the permitting. They don't expect to have a mine any earlier than 2017. Could
be 2-5 yrs beyond that. Maybe never. They have equiv gold reserves/resources of 177 MILL oz., just a tad lower than world's #3 miner largest gold miner Goldcorp.

There are other miners who report net byproduct costs where silver and base metal revenues are subtracted from gold costs. Some companies like Yamana
might have a net byproduct gold cost of $50-$200/oz. It doesn't really mean they are that much more productive than the next guy. It still costs money to
mine the copper and silver. The days of many miners having gold cash costs of $250-$400 across the board are pretty much long gone. I now figure the
average all-in cost in the industry to be around $1000 average gold and $20 silver. Harmony is on the high side of that because of the age of some of their mines
and all the geo-political issues in South Africa. The top 3 of Barrick, Goldcorp, and Newmont are probably at all-in costs range of $600-$900/oz. These miners now
plow through approx 2X the ore that they did just 10 yrs ago to keep about the same production. 2011 was the first time where gold production has exceeded the
2000-2001 annual peak. You couldn't tell there's been a bull market based on production over the past 10 yrs.

ModernCoin

<< <i>I disagree. I watch Gold Rush on Discovery. So I can tell you with some authority that it costs $15,000 to $20,000 to produce each ounce of gold. >>



Admittedly I'm hooked on that show, but I refuse to believe real mines operate the way these clowns do.

TheBigB

<< <i>In Peru, Newmont and Buenaventura are trying to build the $4.5 BILL Conga mine but the locals have been protesting and striking. The mine is on hold. The
Pebble mine in Alaska (Northern Dynasty) has been around for >25 yrs but still no mine. It's one of the richest deposits currently known. But since it's located
near the coast line and major riverways, it's been a constant fight for each stage of the permitting. They don't expect to have a mine any earlier than 2017. Could
be 2-5 yrs beyond that. Maybe never. They have equiv gold reserves/resources of 177 MILL oz., just a tad lower than world's #3 miner largest gold miner Goldcorp.
>>



Thanks roadrunner for great info. I'm afraid that for projects like the Pebble mine the prospects are poor from increased awareness of ecological risk. It seems that we have arrived at peak gold partly from the regulatory and political environment of today.
In the case of Hecla, I took a chance after the incident to pick up some shares.

Weiss

AUandAG

Unexpected costs do arise. Just look at the new open pit mine that is starting up in Goldfield, Nevada. The
ore is located on both sides of US395 which is the major north/south highway from Vegas to Reno. I hear
they are going to relocate the highway! Now that is a major expense that was not anticipated as the ore
body crossed the highway!

bob

TheBigB

<< <i>Unexpected costs do arise. Just look at the new open pit mine that is starting up in Goldfield, Nevada. The
ore is located on both sides of US395 which is the major north/south highway from Vegas to Reno. I hear
they are going to relocate the highway! Now that is a major expense that was not anticipated as the ore
body crossed the highway!

bob >>



Now what if when relocating the highway they run into important habitat for the endangered Desert Pocket Mouse?

When the original highway was constructed different regulations were in effect.

AUandAG

This is Nevada, we don't give a rats arse to the desert pocket mouse or any such critter!

Feds be damned, grab the rifles and pass the ammunition!

bob

RobertS

lol I watch the show because is ammusing, it goes to show how incompetent and naive som people can be lol