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Gold operating costs fall 8% year-on-year according to Metals Focus

At a time when the gold price is offering gold producers few favours, they have responded by cutting operating costs, the one variable they have a certain amount of control over. According to Metals Focus’ latest Gold Mine Cost Service, global gold total cash costs averaged US$664/oz in Q2 2015, a drop of 2% q-o-q and 8% y-o-y. The consultancy says, “This represents a multi-year low, and some $118 below their Q2 2013 peak of $782/oz. As a result, the average basic producer margin (gold price less total cash cost) in the quarter was $530/oz, in line with the previous two quarters in spite of lower gold prices”.

Metals Focus concludes that one of the main driving forces behind this trend has been the weakening of gold producing countries’ currencies relative to the US dollar but the decline in the oil price has also helped, with the average price of Brent Crude in the second quarter some 35% lower y-o-y.

Turning to all-in sustaining costs (AISC), declines for this metric have slowed relative to total cash costs, and as a result all-in sustaining costs were flat versus Q1 2015, according to the consultancy. It also notes that the additional all-in sustaining component has remained relatively static over the past 12 months at around US$250/oz, while average total cash costs fell by 8%.Commenting on this, Metals Focus argues that “the potential savings for the majority of all-in sustaining costs have already been released, not surprising given it was these line items that were most severely cut following 2013’s gold price crash, as capital expenditure budgets and corporate head counts were slashed”.

Gold operating costs fall 8% year-on-year according to Metals Focus

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