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  • What It Really Costs To Mine Gold: The Barrick Third Quarter Edition [View article]
    TDW - No contention with what you suggest. These factors should be included in any mining companies operating and financial assumptions.
    Nov 26, 2013. 11:16 AM | Likes Like |Link to Comment
  • What It Really Costs To Mine Gold: The Barrick Third Quarter Edition [View article]
    Hebba, I think you have embarked upon a very complex subject here. What is not provided is the assumptions required to understand the cost modeling by each of the companies. Interesting to work to compare, but interesting isn't composed of clear facts or comparison opportunity.

    Assumptions should include many things such as, what gold prices will be forward-looking quarter by quarter. All-in costs are affected by volume significantly as well. One company may be able to produce a limited quantity at 1100 per ounce. But, if they scale production their incremental costs may rise.

    Wages and other fixed costs often carry "capacity". A company can reduce fixed costs, maximize capacity of the fixed costs and optimize the cost of production. but, depending on what the pricing environment of the commodity is doing, this may result in placing the performance of the company (and the resulting stock price) at the lowest of all companies in the sector, or the highest.

    The unknown to all of us at present is, what the price of gold will be in Q1, Q2, Q3, Q4 2014. And, if those prices vary, will companies be making adjustments? A company with the balance sheet to look long-term, may make no adjustments to fixed and variable costs and may be focused on growing production with a view that gold prices will be - 2014 avg 1500, 2015 1700,. 2016 1900, 2017 2200.

    To make this discussion meaningful, I suggest figuring out a way to understand each companies planning horizon and assumptions that drive their business model, balance sheet and income statements. Because in the end, this is what is going to drive stock performance. The lowest cost producer if they can't move their stock price, is of no value to an investor. The highest cost producer, if they manage assumptions well, have balance sheet strength and can look beyond short-term weakness and be more accurate in future forecasting, may drive superior returns.
    Nov 24, 2013. 09:03 PM | Likes Like |Link to Comment
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