The cost of building a goldmine has increased significantly over the past decade, from US$560/oz to more than $2,300/oz last year. These estimates come from a new report by SNL Metals & Mining, which show that capital costs are expected to peak this year at almost $2,400/oz. SNL has also observed the cost of operating a mine also increased over the last 10 years. Weighted-average annual cash costs increased about 190% from less than US$250/oz in 2004 to a peak of US$708/oz in 2012, before pulling black slightly to US$702/oz in 2013, said the report. This of course doesn't take into account the total production cost, which is estimated at an average of more than $1,000/oz for the industry. Rising costs mean a strong gold price is needed in order to ensure supply. (VIEW LINK)
Correct James. Norton Gold Fields is also undertaking a similar growth strategy based on expansion from a central processing facility. Ultimately, this all means firmer gold prices will be required to underpin future gold development, given China and India's continued growth in consumption.
Good article Gavin, it certainly makes it difficult for explorers and even mid tier operators to attract capital. I think numbers like this must really underpin the logic behind growth strategies such as the one being employed by NST. So much cheaper to buy these operating assets than to dicover and develop new resources. Probably a good long term sign for the gold price