Tuesday, 3 December 2013

Gold Miner Cost Decreases to Come ?

The industry is under enough pressure on all fronts that the weakest companies could fail. All should aggressively reduce costs, the scramble for people and resources in a hot sector should be gone. With this in
mind could it be the case that costs have peaked, as discussed at the Mines & Money Conference, reported by Mineweb
The mining cycle peaked at the end of last year,” Bachmann told the Mines and Money audience, “There is a direct correlation between mining expenditure and costs and that cycle has turned.”“A lot of investors have the perception that costs are linear, Costs can actually come down, we think that, in the gold industry, Q1 2013, was the peak in the cost cycle for gold and over the next 2 to 4 years we expect costs to come down aggressively.”
Or is there a risk that many cost reductions will be a "fudge" with cuts to exploration essential for the future, or a turn to high-grading which could mean re-assessment of the mine's economics. Again discussed at Mineweb
 They got themselves into the current plight by bowing to the ‘growth at almost any cost’ pressures from the institutions in the past and are now suffering from the apparent reversal of this policy. Most of the mining companies have excellent and experienced operational personnel who would have been more than happy to point out the profligacy engendered in some past capital projects in particular, but were either not asked or not listened to.  In an industry nowadays mostly run by accountants and dictated to by financiers, actual operational basics have often been left behind or disregarded. Mining on paper is becoming divorced from mining on the ground. Somewhere there should be a happy medium.

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