In its 2013 Annual Report, Barrick Gold reports the following costs.During a gold bull market, I have a strong preference for gold stocks over either gold bullion or gold coins, largely because gold shares are leveraged to the price of gold.The gold price was on a crazy roller-coaster ride during 2016.Note: Acquisitions include both cash paid and the value of shares issued.Gold Stocks and The Great Crash of 1929 Revisited. The stock price of this gold mining company soared relentlessly upward during the entire bear market.
The first attempt at using a dredge to mine gold in 1853 was a.Examples of IMP include stripping costs, underground development in advance of mining, shaft sinking or deepening, equipment replacement, and new haul roads.In order to fully understand the problem and formulate a resolution, we must follow the cash.In the past decade, fuel consumption at the top gold miners more than doubled, but the.Mickey is well-known and highly respected throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker.In other words, as the price of gold rises, profits of gold-mining stocks rise more in percentage terms.Their poor performances have called into question the validity of cost reporting measures in the gold mining industry.
Even with long-term gold price estimates well below current prices, the stocks are trading cheap relative to their estimated Net Asset Value.Executives receive larger bonuses and, as long as the company grows, shareholders and analysts remain content.Gold miners must focus on quality of ounces verses quantity of ounces produced.Since we are focused on following the cash, they do not include the value of any shares issued.The Mongolian miner Khuyagaa draws on his cigarette, behind him a pile of dirt and rocks, the result of his labor, the earth turned inside out.The commission price is lower than for gold coins or similar-sized purchases, and storage is as low as you will find for gold storage of any size in the world.
With the price of gold now nearly 40% off of its recent peak, some investors see an opportunity to profit from a future gold price rally.As stated above, IMP is a significant annual expenditure for each company with an industry average of 33% of cash flow over the past 11 years.It is very important to note here that cash spent for acquisition of new assets has its own separate category in the Statement of Cash Flows and is not included in IMP.OPEX can also be shown as Cost of Goods Sold, Production Cost or Cost of Sales.
Acknowledgments: I thank Rod Husband and Elena Tanzola of Cipher Research Ltd, Vancouver, B.C. for confidential access to a white paper that forms the basis of this musing and permission to publish.Classification of costs in mining is challenging due to the nature of operations.
How the Big Guns Are Playing Gold Mining Stocks - BloombergAll-in sustaining cost was devised by the World Gold Council and senior gold companies to standardize a measure that adequately addresses all-in costs.Gold stocks are characterized by a high correlation with the price of gold.Readers have heard considerable doom-and-gloom here over the past year: bullion prices must go (still) lower before they can go higher.However, when expenses are kept routinely low with too many costs capitalized, the scales will periodically tip too far.
Nothing in any report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation or advice to buy or sell stock or any asset or investment.These are the three conditions we want to see in the cash flow statements of a healthy gold mining company year over year.
PPT – Gold Mining Industry PowerPoint presentation | freeOver the past year as the price of gold has fallen, many have asked how artisanal miners will be affected.We hope our government will never make the same foolish decision to make gold ownership illegal again.My appreciation also goes to an unnamed British Colombia Chartered Accountant for his vetting of the methodology applied herein and clarification of some concepts of capital depreciation.The following numbers include total cash spent on acquisitions and IMP.When Cipher includes IMP in determination of cash flows from gold mining operations, we see a very different picture from what the gold mining companies have been reporting using currently-accepted non-GAAP measures.Although the price of gold has increased significantly since 1967.
There is no significant correlation of IMP with the price of gold.Explore unique gold market and gold industry research and understand what keeps gold relevant today.This allows us to accurately relate any financial item to a standardized unit, which in turn allows for a more appropriate comparison between gold mining companies and projects.
Most of the gold mining districts in the West were located by. wide fluctuations in the price of gold are not.It is indirectly classified under Cash Flow from Operations and represents direct costs attributable to the production of goods, in this case, metals sold.It is apparent that either depreciation needs to be increased to more representative levels, thus reducing annual earnings and periodic massive write-downs, or IMP should be expensed annually.Gold Prospecting in the United States. if the discovery is developed into a producing mine.Therefore, on average these seven major gold producers used up 78% of their annual cash flow in OPEX and IMP.Overpaying for acquisitions is a common theme in the mining industry and the topic of another entire research report.
Gold - USGS
We have shown that serious fundamental problems are endemic within the industry and have provided solutions to cost reporting and developed evaluation methods to analyze actual profitability over a significant period of time.First, if you own gold bullion, it is, in a sense, risk free-as long as you retain possession.