gold hammered, page-63

Pilatus,

You could probably look back a couple more years to around the 2006-2007 era when gold was around $750-800/oz, which was enough to make people's eyes boggle and money pour into the sector - and that was before gold's real meteoric rise. Mining accountants are also very good at amortising costs over several years on the books, so the real cost per ounce of production in any given year may be significantly higher than what they report.

However, gold is still $500/oz or so higher than it was back then, so what has changed in the industry in general to lead miners and investors to think the end of the world is nigh?

As a geologist who works in an underground gold mine, I can tell you one thing we've all noticed which is that costs have gone out of control. For example, why are we paying graduate geologist's fresh out of Uni $100,000 pa, compared to $115-120,000 pa for an experienced geologist with 6-8 years experience? It's just ridiculous. At the same time, the quality and grade of the ore bodies the industry is mining is going down - we're just not discovering enough new ore bodies to replace the one's we're depleting.

It may surprise you that most gold mining start-ups are doomed to fail from the beginning, yet for some reason the allure and attraction of gold still draws people in. The recent history is littered with the carcasses of the likes of Reed, Monarch, Range River, Focus, View, Navigator, A1, Apex etc.. etc.. In short, we're not very good at doing what we'll say we're going to do. However the comedy routine keeps rolling when the deposit is bought on the cheap by someone else, changes name, gets re-branded, and confident-sounding proclamations are made by important looking guys in suits, who don't really know what they're dealing with. Then of course, the game starts all over again ;-)

A lot of good people were lost during the GFC, either through attrition or just wanting to get out of mining and do something else. From what I've seen, a lot of the Gen Y'ers coming through are a poor imitation of their predecessors. The desire and hunger to succeed just isn't there. We're starting to see an improvement in the quality of technical staff now, but we have a long way to go to make up a yawning hole in the skill sets of many geology and engineering mining departments - and that has definitely hurt us as well.