(Rick Wilking/REUTERS)
By David Milstead
The Globe and Mail
A scan of major gold producers’ earnings suggests the cost of mining gold has risen dramatically over the past few years. Part of that is a true increase, owing to inflation and the expense of digging out tough-to-reach grades. But most of it is due to a change in the cost metric that gold miners emphasize in their reports to the investing community.
For years, miners liked to talk about “cash costs,” the mine-level expenses of pulling an ounce of gold from the ground. For the most part, cash costs ran from $500 (U.S.) to $800 per ounce, depending on a miner’s properties.
There was a problem, however: Even as the price of gold skyrocketed to nearly $1,900 per ounce, miners weren’t reporting wild windfall profits on their bottom lines. That’s because cash costs left out a host of expenses, from the costs of running the company to annual spending on equipment.