we've been all wrong?, page-2

Hi marketgenius,

this is one fall that I missed out on.

What confuses me is the very high cost of production for many producers.

Edikan I think had an all in cost of production of $1100/ounce. When I looked at Silver Lake Mines its Murchison mine had all in costs of $1400/ounce in the September quarter down from $2200/ounce for the previous year.

I'm sure these weren't the levels of cost of production explained by miners when discoveries and mine ramp was happening.

What has caused the massive spike in production costs?

If a gold mining company has borrowed heavily to ramp up to production how will it service borrowing costs apart from dilutionary capital raisings?

Here's an excerpt from a recent report on Newcrest Minning (which is also looking vulnerable as the gold price falls):-

"
NCM’s cash costs for the September quarter were $1093 an ounce (oz), whilst the average realised gold price was $1442/oz.

With gold prices recently trading around $1285/oz that implies NCM’s cash margin has shrunk by approximately 44% since the end of the quarter, to $192.

It also means that Lihir, with a cash cost of $1152/oz, Telfer, with a cash cost of $1296/oz and Bonriko, with a cash cost of $1889/oz, have either become uneconomical or are very close to it.

The balance sheet worsened considerably in FY13, with the net debt to equity ratio soaring from 14% to 41%.

High costs and falling gold prices are hammering the group’s cash flows, limiting its options to arrest the balance sheet deterioration. This increases the odds of a capital raising.

NCM stuck to its FY14 production guidance of 2.0 – 2.3 million ounces. Unfortunately, it is mining lower grade ore from its gold mines, as evidenced by the September quarter production report.



Read more: http://www.australianstockreport.com.au/share-tips/category/gold-stocks-australia/#ixzz2mTuJnMfF"