what happens when gold stays below $1,200?

What happens when POG stays below $1,200? When costs of production exceed sales price a company can't keep going as before. It has 3 options. A) close shop and stop producing, B) continue until firm get closed by creditors/liquidator. C) Cuts cost of production and maintain production. C is the preferred solution but many managers seem unwilling/unable to execute this. So let's assume half the word's mines stop production. What is likely to happen? Gold is not a consumable like food or oil or coal. Hence, life/daily living can continue without it. Even if money is available to place mines on a care&maintenance schedule... restarting a mine is a major task and very expensive. One doesn't flick a switch and widgets fly out the mould. Let's take an extreme but significant example. Mines in S.Africa are 110 years old. They are now 3 kilometres deep. The cables holding-up the lift are so heavy they are in danger of snapping under their own weight. Stop production and the water flooding into the shafts will wreak havoc with the complex engineering systems powering the massive refriderated air system. That's assuming much of the moveable machinary has already been removed. But is even that possible? I doubt it. Close a single big mine on the Witwatersrand and 10,000 jobs go in an instant. The place is already a tinderbox as demonstrated when police and activists killed over 40 people last year at a platinum mine far smaller than some of the big gold outfits. If workers see management pulling-out the vast amount of underground infrastructure they'll realise their jobs are gone for good. I suspect they'll sabotage the place and hostage taking is not inconceivable. it's happened before. But striking/unemployed workers can't stop the water pouring-in any more than King Canute stopped the tide. In short: Close a substantial UG mine and it will take massive amount of capital to re-open it. Let's say the mine is break-even at $1,200/oz and POG keeps tanking. Will the mine re-open at $1,600/oz? I can't foresee it. The capital expense involved wouldn't warrant a profit margin of just $400/oz. Let's say POG flies to $2,000. Here serious consideration would be given as profit margin is 66%. But what guarantee would investors have that after ploughing a huge amount into re-opening the mine that the POG will stay at $2,000? POG has collapsed several times in past 40 years. Would you risk it not happening again? I reckon to see a widespread return to previous full production POG would need to offer investors 100% return on production costs i.e. $2,400/oz. At this price board can hedge at least 2-3 years production. One can argue with these figures. My point is that once closed an UG mine such as in S. Africa (and their must be others around the globe) is pretty much closed for good. Is this fact in and of itself, likely to see POG leap once many mines have closed. i don't know. remember gold is not a consumable. But people do desire owning it.

PS. Here in RSA and i quote from Wednesday's BusinessDay: "Earlier this week, the Association of Mineworkers and Construction Union tabled a 100% wage demand for all unskilled and semiskilled employees in the (RSA) gold industry, raising fears of a strike and attendant consequences for production if its demands were not met. The National Union of mineworkers tabled a 60% wage demand last month.
Spot gold fell to $1,236/oz yesterday (Tuesday), which analysts deemed unsustainable for the bulk of SA's gold mines."

PPS. MM. Staying here is like living in a surreal movie but i find myself unwilling to return home to QLD just yet. The place is about to explode/implode and probably both. The govt is clueless and talk about 'forbidding mines to lay-off workers' as if that somehow will make the whole issue go away. I'm referring to situation of 6 months ago when mines were vaguely viable! Now they don't even mention the fact POG and Platinum have collapsed! The topic is verbutan whilst they just stick their heads deeper into the Karoo sand.