What It Really Costs To Mine Gold: The Eldorado Gold Edition

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Hebba Investments


In an earlier article, we showed investors how to calculate an "all-in" cost figure for producers that includes all costs related to mining silver. This is one of the most important metrics to analyze the silver industry, and allows investors to easily compare companies and see where a potential bottom lies in the silver price. We will now use the same methodology to calculate the "all-in" gold cost figures.

In this analysis, we will calculate the true costs of production of Eldorado Gold (NYSE:EGO), a gold producer that owns operating mines in China, Turkey, and Greece. In addition, they own two base metal mines located in Brazil (an iron-ore mine) and Greece (a base metal mine). EGO also owns a few development projects located in China, Greece, Turkey, and Romania.

One thing that investors should note is that EGO owns development properties (and one operating mine) in Greece, a country with significant political risk. Investors in EGO should follow developments in Greece closely.

Calculating the True Mining Cost of Gold - Our Methodology

In a previous article about Goldcorp's (GG) per ounce cost of production, we gave a thorough overview of the current way mining companies report their costs of production and why it is inaccurate and significantly underestimates costs. Then we presented a more accurate methodology for investors to use to calculate the all-in costs of mining gold or silver. Please refer to that article for the details explaining this methodology, and I would encourage all precious metals investors to understand this important concept. It is important for investors interested in miners (or those who focus on gold and silver as a commodity investment), because the true costs of production would be a good indicator of where a possible floor may exist for gold or silver.

True Costs

This article was written by

Hebba Investments profile picture
I'm an asset manager at Hebba Alternative Investments with a focus on real assets. In my articles I like to focus on events that affect the macro environment for assets (especially gold and silver), and also introduce readers to different metrics that I believe are under-utilized when assessing investments. On a more personal note, I'm a firm believer that there can be honesty, morality, and integrity in finance (though its rare) and i'd like to believe that I stick to those principles. Thus I never "pump and dump" stocks, I always list the securities we own, and I take it very seriously when I recommend a company - I do not want to see any investors/readers lose money because of my recommendations. I'm not always right with recommendations, but investors and readers can know that I always tell the truth (there is no deception) and I eat my own cooking as recommendations are either always owned OR the reason I dont own them is given (usually related to restrictions on stocks I can buy). Advising people in financial matters is a serious issue and integrity is much more important than money to me, but I do believe both can co-exist. You live with money, but after your death you only have your morality and integrity and thus i've made my choice between the two. A bit philosophical for a bio, but I dont think there's a better way to give investors my background than that. We offer investors a free weekly email list detailing gold, silver, and general economic markets which you can sign up for at: http://www.communitysynergy.com/subscribe/hebbainvestments_subscribe.html

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