New information suggests that the cost to produce gold is much higher than what the market realizes. As the cost to produce gold has skyrocketed over the past two decades, the mining industry has hidden certain costs by placing them in their capital expenditures. This has lowered their "Cost of Sales" figures but has significantly increased their capital expenditures.
Furthermore, this massive cost shift has forced the gold mining industry to tackle these big problems, with big solutions. However, these big solutions come at a big cost. For example, as the average gold ore grade has fallen substantially over the past 20 years, the gold mining industry now has to move a great deal more ore to produce the same or even less gold.
In order to move a great deal more ore, the mining industry has to spend a lot more on trucks, tires, materials, energy, and labor. In my newest video below, I show in detail the BIG CHANGES taking place in the top four gold miners in the world:
I believe several of the charts in this video has never been seen before by precious metals investors and alternative media community. To understand why the cost to produce gold is higher than what the industry has led us to believe, we have to focus on the massive amount of capital invested by the gold mining industry.
Unfortunately, the investment of billions of additional dollars in capital expenditures by the top gold miners has not kept production from falling. Actually, the top four gold mining companies' production peaked more than ten years ago and continued to trend lower.
One of the charts in the video shows the enormous increase in the amount of ore processed at Barrick's (NYSE:ABX) Nevada Gold Mining Operations. In just 20 years, Barrick's Goldstrike and Cortez Mines know how to process four times, 24 million tons of ore, to produce the same amount of gold they did in 1998:
To understand the tremendous increase in capital expenditures and costs to process four times more ore to produce the same amount of gold at Barrick's top mines, I highly recommend watching the video above. Moreover, I provide additional cost analysis on the top four gold miners as a group.
The gold mining industry is plagued by rising costs in all areas. While some of these costs have decreased over the past several years due to a falling oil price, these costs will likely increase going forward as ore grades continue to decline. Furthermore, as global oil production begins to experience "Seneca Cliff" like declines in the future, gold production will be negatively impacted, even with much higher gold prices.
Precious metals investors need to understand the changing "Energy Dynamic" and its impact on the entire economy and financial system. While the gold and silver prices continue to trend lower, this should not be seen as a WEAKNESS, but rather as a STRENGTH.
Soon, the days of buying gold and silver at bargain basement prices will be gone forever.