Gold Mine Cash Costs Rise in Q1

Source:

". . .largest percentage increases were in South Africa and North America."

Gold mines, particularly in South Africa, could suffer if prices corrected toward $1,000/oz, according to

a Fortis Bank Nederland/VM Group report. The report states, "the average cash cost of gold mine production was $544/oz in Q110, the highest average cash cost yet in our data series, and $29/oz higher than the previous high last quarter."

Over the past 12 months, average cash costs have risen 20%, or $91/oz, from $453/oz in Q109. While this is comfortably below the $1,109/oz average gold price for the period, the range between low- and high-cost producers has grown. And, for the first time since Q209, the spread has narrowed.

"The average cash cost at the first quartile, the point where 25% of production is of lower cost, fell to $372/oz from $382/oz. But at the third quartile, where 75% is of lower cost, costs rose to $646/oz from $616/oz," the report says, adding, "Costs at the 9th decile soared even higher, to $818/oz from $738/oz.

Part of the reason for the jump in costs is the report explains is the type of data collected. The report is based on 226 gold mines (for the period Q110), which collectively produced 10.8 Moz of gold.

This, the report says, is higher than the measured costed production in Q109 of 10.3 Moz, but lower than that seen in Q409 of 11.6 Moz.

According to Fortis Bank Nederland/VM Group, "The median mine in Q110 has higher costs than the median mine in both Q409 and Q109$547/oz compared with $495/oz and $435/oz respectively."

And, if one looks at the numbers on a regional basis it is evident that South African miners have by far the highest cost base, with an average cash cost of $798/oz, up $92/oz on Q409 and $343/oz from Q109.

"All except Latin America saw their average cash costs increase in Q110 compared with Q409, with the largest percentage increases in South Africa and North America. . ."

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