Our IRR analysis of the major gold projects under construction globally reveals that the long-term gold price will need to be US$1,400/oz to justify capital cost. For greenfield projects, the gold price would need to be closer to US$2,000/oz to generate the minimum required return. Escalating costs of building gold mines could result in delays at many projects.
A decade ago gold was under $500, five years ago $600/oz - yet clearly profitable to mine as it remained under $500 for a *long* time. Lower grade deposits would have been put on hold during this time (not quite there as far as economics go), so I find it extremely hard to believe that within a five year period $1400 or $2000 are the minimum prices required to develop these less economic deposits. What happened to all the in between prospects, with cost of production in the $600-$1200 range, did they vanish overnight? Just doesn't make sense to me, this is not like peak oil, grades should gradually diminish, not spike like the markets.
