Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Use of the “all-in sustaining costs” (AISC) measure of gold production is on the rise, as it provides a more comprehensive look at costs than the traditional “cash cost” approach.
The AISC measure, finalized in June and supported strongly by the World Gold Council, includes other expenses such as general office spending and capital used in mine development and production to create a benchmark of a company’s operating efficiency.
“The economics of gold mining have not been as well understood as they could be by a broad range of people including governments, communities and even employees,” said Terry Heymann of the WGC.
Goldcorp was among the first to alter its reporting standards, doing so at the beginning of 2013. The company’s 2013 cash costs were forecast at $525 to $575 per ounce, and all-in sustaining cash costs were $1,000 to $1,100.
Earnings reports from some of the other big gold companies indicate an AISC of between $1,200 – $1,400/oz, the Financial Times reports. In some cases AISC has even crept up over $1,400.
Barrick recently reported an AISC of $919, very much on the lower end of the AISC spectrum.
Goldfields checked in at $1,280/oz and African Barrick was up high at $1,416/oz.
Not all are in favour of the new measure, however. Randgold CEO Mark Bristow called the measure irrelevant, pointing out that companies could get away with reporting “positive margins between sales price per ounce of production…yet, because of writedowns or impairments, still register losses.”
Read the WGC’s Guidance Note on AISC here.
