Hey Brian,
I also agree strongly with you, margin is what is so important, and that is perhaps why RRL flew so high when other producers did not, not so long ago, their margins were the best in the market. As you say, due to the nature of mining stocks, a 'one size fits all' valuation for stocks generally, usually only provides half the story.
Fair point about the grades overall. There are a few outliers like RMS that have indeed seen grades increase, for a number of reasons.
I guess it is very logical that grades overall are falling, especially when over the past 3-5 years, the average price of gold globally (all currencies) has increased, meaning many miners have been increasing the pit optomisation price, meaning, lower grade ore is now filling more and more plants, which in turn, is further amplified by the lack of large high grade discoveries, when most 'new' ounces are simply, from existing discoveries (brown field drilling etc).
Only those like RMS who have been able to pickup high grade stranded deposits, which can then be blended with low grade reserves, are able to buck the trend (I am perhaps biased, but I also think SAR might not be lowering their grades.. but I need to check that).
If I may, I am going to speculate at the main drivers of cost.. for the miners (though I know you already know them, its more just an exact weighting you are after.
Wages.
Fuel
Power
Equipment/Contractors
Taxes
Exploration
Strip ratios (but.. that gets murky, because it includes much of the above- but supports my view above, that lower grade ore is being included, which usually means, larger amounts of stripping).
A very, very astute poster,
@Pointyfigures has mentioned a couple of times that he continues to be surprised by the lack of innovation in the Australian gold sector. Why is RSG pioneering robotics and solar in West Africa...? Wages are so much higher in Australia (all costs probably are), yet.... nope. Very little happening here.
Anyway, I better not get too off topic.
@Isladar - I am of course, saddened to hear that a miner lost his life back in 2000. However, that really does have nothing to do with the current operator. I would hope, that with WGX owning their own contractors (oxymoron I know), I feel relatively comfortable that they would be well run, and hence the safety of all staff would be of the highest priority.
As for grade and profitability, at the low POG of the early 2000s, sure, it was touch and go, now however, to date, whilst WGX usually missed guidance, they still hit their AISC, so.... those mining the dirt, are doing ok. Appreciate the history though, its amazing how many times the assets has been flipped and flipped.
Further off topic, the more I watch WGX, the more I feel it is prey, waiting to be snapped up. In the right hands, WGXs operations would surely be worth much more than what it is right now. Especially when the company has basically, been pouring capital into its projects for 4+ years.
Anyway, WGX share price moves do not surprise me, it will fall further than most, but... value has to be around here somewhere. E/V of under $800m is getting quite surprising. That being said, if I buy more, it will be around the $2.00 mark.
Good luck to all holders.
(20min delay)
