Sunday, 7 December 2014

Gold Miners' Production Costs - Dundee - Plus cost build ups and drivers.

Dundee research at CEO - comparing costs across their covered miners.
I have appended a chart from Goldcorp's presentations showing fuel/power and labour/contractor costs across their various operations.
These costs make up ~50% of operating costs and impact both operating costs and sustaining capex. If gold can stabilise in US$ terms then the "real price" of gold against operating costs can increase which should be a key driver for the miners .....more....

Of course falling oil prices should make for lower costs in Q4.
Clearly large open pit milling operations should benefit greatly compared to underground mines. Goldcorp's "fuel and power" costs are 11% of operating costs in Canada/N.America, 23% in Mexico and 23% in Central/S.America.
The weakening of "commodity currencies", by around 20% against the US$, should also benefit miners operating outside the US as labour costs in local currency, in a mining industry with less pressures on growth and skills, should be pegged down.
Commodity currencies peaked in 2011. Mexican Pesos have weakened from ~ 11.5 to 14.3 pesos:$.
Canadian dollars weakened from 95c to 114c CAD:USD. Australian from 95c to 120 AUD:USD
Again for Goldcorp Labour & contractor costs as a % of operating costs are 37% in Canada/N.America, (more underground labour intensive and higher pay rates), 30% in Mexico and 29% in Central/S.America.

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