excellent smc presentation by phillip bruce, page-16

according to the Gold Institute Standard the development costs are part of cash costs but it seems to me that many Aust mining companies are not including development costs in their cash costs number - CTO for example and HEG maybe

to overcome this questionable activity my approach is to calculate "two year forward" cash costs, a projection into the future as if the operation was a stable on-going activity

furthermore, depreciation is not included in "cash costs" so a number that is sometimes quoted is "total production costs" which does include depreciation

my numbers for HEG

cash costs per ounce excluding depreciation = A$271

cash costs per ounce including depreciation = A$334

a much more reliable indicator of profitability is cash costs per TONNE of ore

for HEG my calculation is A$193 (including depreciation)

then when you know the head grade the cash costs per ounce is easily calculated

geologists commonly quote the cut-off grade (at which costs are break-even), which is a very reliable indicator of costs so for HEG if that number is 5 g/t converting that to A$ comes out at about $190 per TONNE

from my point of view all looks good at Hill End - the numbers stack up very well for a highly profitable future