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Jbay76 (< 20)

Mining Eval Question

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March 23, 2011 – Comments (7) | RELATED TICKERS: GPL , AUQ , SLW

Fools,

What does it mean when I read something like this in a quarterly report?

" Gold production of 29,384 ounces at cash costs of negative $388 per ounce for a record margin of $1,769 (128%) per gold ounce"

Does this mean that it did not cost a thing to get that gold? 

Thanks for helping me learn!

J

7 Comments – Post Your Own

#1) On March 23, 2011 at 12:43 PM, 100ozRound (29.41) wrote:

It did cost them money to mine the Gold, but they sell other metals that are by-products of their mining activities and the sales of these by-products are a credit that offset some of the costs involved.

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#2) On March 23, 2011 at 12:52 PM, chk999 (99.98) wrote:

Suppose I have a copper mine that has a little silver and gold in the ore. The mining/crushing/milling costs are paid by the copper. The silver and gold streams come out for a small extra milling cost. The gold and silver would have a small (or negative) cost depending on how you do the accouting for them.

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#3) On March 23, 2011 at 12:57 PM, Jbay76 (< 20) wrote:

I see, thanks 1000zRound.  So then the company uses the proceeds to pay for its operations instead of taking out a loan, selling more shares etc.  And since they sold the gold at 388/oz., they were able to make a profit of 128% per gold ounce sold.  That value, $1769/oz was then used to pay off the extraction of 29, 384 ounces of gold.  Do I interepret the gold production statement correctly?

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#4) On March 23, 2011 at 1:00 PM, Jbay76 (< 20) wrote:

Thanks chk999 for the easy-to-understand example!  Is my interpretation in #3 correct?

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#5) On March 23, 2011 at 1:04 PM, Jbay76 (< 20) wrote:

Thanks chk999 for the easy-to-understand example!  Is my interpretation in #3 correct?

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#6) On March 23, 2011 at 1:10 PM, chk999 (99.98) wrote:

I don't think you interpreted that correctly. The gold cost them -388 per oz. They sold it for 1381 per oz, giving them a net profit of 1769 per oz. They sold 29,384 ozs for a total profit of 51,980,296.

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#7) On March 23, 2011 at 3:49 PM, Jbay76 (< 20) wrote:

OK, thanks for that clarification!

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