Progress summary, page-39

I track the financials of over 70 PM stocks and, amongst lots of other things, calculate their AISC (all-in sustaining costs).

It's a sad reflection on the state of the industry when the average AISC of 54 of those gold producers (including the biggest) works out at US$1,402/oz for 2014. Some 21% above today's gold price.

Even after drastic cost cutting through staffing cuts and mine closures and C&M, most of them are severely under-water at the prevailing gold price.

But the best cure for low prices is 'low prices'! Ultimately, production will be severely curtailed and it must be already apparent that due to the drastic reduction in exploration expenditure and new mine development, there will be an inevitable production decline in the years ahead.

For silver producers, I calculate that their average AISC for 2014 was US$19.9 across 17 of the biggest. Some 26% higher than today's silver price! This makes no rational sense when the vast majority of global silver produced annually is consumed by industrial processes.

We live in a world were sovereign bonds of heavily indebted nations are priced at yields that reflect zero risk yet the price of the monetary metals is controlled by massively leveraged paper markets at well below the real costs of production. Go figure!
CPDLC