Hi budFOXjnr,
There are many types of gold miners .
For a start gold prospectors and gold mine builders are not miners.
To be a miner, a company has to be mining gold; that is producing.
There are a few types of gold miners;
-open pit, hard rock
-open pit sand-gavel
-Underground hard rock
Underground narrow vein.
etc
The economics of each different type will be different,
EG:
(a) open pit-hard rock usually requires the removal of overburden
which is a major quarrying operation. Most have an overburden ratio
of at least 5 to one; that is to get 1 ton of rock bearing ore, 6 ton has to be shifted
and all this costs money. for example if you go to your local builders' supplier
you'll pay about $80/cu.m for gravel and in gold mining this type of gold bearing gravel has to be
ground down to dust by ball mills of a SAG mill in order to chemically leach the gold.
So the key to the whole process is GRADE....as they say, grade is everything.
In Australia open pit mines usually have grades from 1 gram/ton to 2 grams/ton
with uneconomical grade cut off at 0.5-0.7 g/t.
(b) UG hard rock mines are usually deeper and have higher grades to justify the costly/labour
intensive UG mining process
(c) UG narrow vein gold mines are simply that ; the gold is trapped in very narrow veins
which the miner follows UG. This type of mining usually has low volume . It is also costly to JORC drill
and this is why such miners prefer to locate the veins and mine them rather than define the veins
rather than spend the loot on drilling and defining mine life.
The key to either of the above is the all-in cost per oz. Some miners publish this and others dont
but the best way is to simply do the sum for oneself: Disregard cash costs because it does not
tell you what the profit after tax/oz is or the EPS.
Take the total cost of running the company for a year and divide it by the number of ozs produced
and there you have it. Then take the average price achieved per oz achieved and subtract
the all in cost and you have the margin.
High cost producers such as NCM had an all in cost of close to $1100/oz (their forecast for 14-15
is just sub $1000. These companies with high cost of production have share prices highly geared
to the POG while companies with a low all in cost/oz are less susceptible to minor variances in the POG.
On the other hand narrow vein UG gold miners such as MML (Phillipines) and KRM (Indonesia)
have low all in costs ; the latter is about $680/oz.
JORC drill results determine the resource and if the annual rate of production is known,
then the mine life can be estimated.
So in summary, you will have to do your own research on gold miners because they all
differ in type of mining, all-in cost/oz, location, risk, mine life and grade (remember grade is everything)
If you are a T/A rather than a Fundamentalist then I can't help you.
Just keep in mind that if the company is not earning that it is speculative and that it will likely
mine your hip pocket before it pours gold.
And finally, you have to be a gold bull before you get into gold mines.
(gold is usually a hedge against inflation and a safe haven in a time of crisis)
You can use Google Finance to compare the financial fundamentals of like
gold miners. Just go to Google Finance, enter ASX: +ticker code in the dialogue box and there you have it !!
This data is usually 3 months behind and you have to guesstimate what the future results will be
(the market looks forward)
Cheers
Moorookamick
NB: all of this is in my opinion and it is advisable to consult a licensed financial planner
who can offer you advice that meets your specific needs. And remember, high potential rewards
usually carries high potential risk. MM
