Pinnacle Activity Ticker
Gold Miner Production Costs
Pinnacle Digest writes: In his latest article, Neil Charnock breaks down a few key components to the gold market. First off, Neil explains, in great detail, the decade long, systematic rise in production costs for gold miners. While Neil acknowledges the fact that cash costs across the gold mining industry vary from project to project and country to country, he takes the global averages into account to give the reader a better understanding as to why $1600 an ounce really isn’t that expensive.
From the World Gold Council site:
"Environmental considerations require that mined gold must be 'replaced' as part of the mining process. The average cost of replacing and producing an ounce of gold rose to $928/oz in 2010, from $282/oz in 2001, and it continues to climb, according to Metals Economics Group."
Charnock explains that over the last 9 years gold production costs have risen (global average) $646 per ounce, which averages out to $71.77 annually. Using the simple averages, that would mean that an ounce of gold currently costs $1,071.54 to produce.
Charnock includes this very telling chart in his article:
The facts are clear. If gold companies are to remain profitable, prices of the precious metal must continue to climb. In addition, at roughly $1600 an ounce, when looking at these statistics, gold really isn’t that expensive.
Charnock elaborates on this critical data and predicts gold could be as high as $2100 an ounce this year.
Click here to read this article.