Miners will need $3,000 gold price to be profitable, WGC head says

pmbug

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Revising a 19th-century U.S. law that governs the mining of gold and other precious metals could add billions of dollars to federal coffers at a time of tight budgets, according to some Democratic lawmakers and a government study released on Wednesday.

Taxpayers receive no royalties on metals pulled from federal land, and officials drew a blank when they tried to find out how much gold, silver, copper and other valuable metal is sold.

"Federal agencies generally do not collect data from hardrock mine operators," said the report from the nonpartisan Government Accountability Office, which looked at the market in 2010 and 2011.

But applying a metals levy of 12.5 percent - the benchmark government share for other resources - could deliver hundreds of millions of dollars a year to taxpayers, according to independent studies and U.S. Representative Raul Grijalva, who sought the report and other data from the mining industry.

"As we face these fiscal challenges, these are the pennies that we should pinch," said Grijalva, the leading Democrat on the panel that oversees public lands.
...
http://www.reuters.com/article/2012/12/12/usa-gao-royalty-idUSL1E8NC5MT20121212

Not sure how much mining is being done on Federal lands, but raising the cost of mining it isn't going to boost production.
 

benjamen

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Unbeatable

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DoChenRollingBearing

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Trying to find out (from Osisko -- not up on the above chart) their gold costs was what I was hoping to do this afternoon, looks like they can't see me, a pity...

My understanding is that the $1200 - $1300 "cash costs" is about right just to OPERATE the mines. Price keeps staying this low ($1230 or so as I write), then, yeah, they'll start closing.

But, as FOFOA sez, that may not influence the ("short-term" -- DCRB comment) price much because of the stock:flow being so high that even if ALL mines shut down that does not cause any short-term problem. <--- I suspect that psychologically mines shutting down, however, might somewhat go against FOFOA's paper gold price predictions, prices might indeed go up on a supply "scare"...
 

Unobtanium

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Tinfoil hat = on.

We have seen charts that show the major banks recently positioning from net short to net long in gold.

Keeping this in mind, does anyone think that TPTB have not only driven the POG and POS down to cover their shorts, but also to drive it down so far that they might purposely drive some of the miners out of business?

Wouldn't this match with what they have been doing in the retail market for decades now: Drive away the smaller grocery stores, hardware stores, department stores, local banks,etc via extra-low mega-store prices, buyouts and mergers. What we are left with is a small selection of mega-retailers, owned by the cronies of TPTB. I am also seeing this happen for the past two decades with technology companies in my field.

Why wouldn't they want to continue this trend with mining companies? Drive the smaller ones out of business and/or buy them out when they are in dire straits, such that in the end, they own all the mines.

Thirdly, driving some of the miners out of business is a good catalyst for the POG and POS to slingshot upward now that they have gone net long.

Tinfoil hat = off.
 

DoChenRollingBearing

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Interesting theory there Unobtanium, could be. Most miners HAVE to sell at market when they produce, they are among the weakest hands there are...

Big mines could eat up the smaller ones and/or the banks could eat them all...
 

benjamen

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http://media.watoday.com.au/busines...gold-halts-production-at-nz-mine-4526841.html

A mine was just closed (production halted) in NZ due to the low gold prices.. First of many?
A Nevada mine already closing:
http://www.mining.com/atna-resources-38601/
"American gold miner suspends work on Nevada project
Ana Komnenic | June 27, 2013 0 CommentsCommentsYour email address . Atna Resources (TSX:ATN), an American gold miner, dropped 20% on Tuesdays after deciding to put its Pinson Mine on care and maintenance, the company announced on Thursday."

"Atna says it will resume operations once gold prices are high enough to maintain a positive cash flow."
 

pmbug

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Bullion must rise to $1,500 an ounce for the gold mining industry to be sustainable, according to Gold Fields Ltd. (GFI)’s Chief Executive Officer Nick Holland.
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The decision by Newcrest Mining Ltd. (NCM), Australia’s biggest producer, to write down the value of its mines by as much as A$6 billion ($5.5 billion), will lead to the biggest one-time charge in gold mining history. Rivals such as Barrick Gold Corp. (ABX), the biggest producer, and Newmont Mining Corp. may be next, according to Jefferies International Ltd.

“There’s going to be significant rationalizing in the gold industry,” Holland said. “You can’t keep mines producing if they’re losing money.”

Gold Fields’s South Deep mine in South Africa is one of the few mines that could survive at the current gold price of 1,230 an ounce, Holland said. The mine’s size and the fact that it’s largely mechanized, meaning it’s less reliant on labor demanding pay rises, will help keep costs low, he said.
...
http://www.mineweb.com/mineweb/content/en//mineweb-gold-news?oid=196081&sn=Detail
 

benjamen

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South African PM miners are in trouble:
http://www.reuters.com/article/2013/07/07/us-safrica-gold-decline-analysis-idUSBRE96607120130707

"According to Roger Baxter, chief economist at South Africa's Chamber of Mines, in the fourth quarter of 2012 the price of gold averaged 509,000 rand per kilogram, but it fell in the first six months of this year to under 400,000 rand/kg.

"This precipitous fall in the price ... has been the biggest decline that has taken place since the 1920s," he said.

"At a 400,000 rand a kilo gold price, our estimate is that about 60 percent of the industry is in loss-making territory."

"Thomson Reuters GFMS ranked South Africa sixth in global production in 2012, when it fell behind Peru and produced 177.8 tons of gold, just 6 percent of the world total, the country's worst year for production since 1905."

"South Africa's fortunes as the world's No. 1 platinum supplier have been sinking, too, and top global producer, Anglo American Platinum (AMSJ.J), wants to cut up to 6,000 South African jobs to restore profits."

"South Africa's gold mines were able to earn tidy profits in 2008 and 2009 when gold was $1,000/oz, but costs - notably labor and power - have ballooned. In the fourth quarter of 2009 for example AngloGold Ashanti's (ANGJ.J) cash costs in southern Africa were $575/oz, but by the same period last year its cash costs in South Africa had doubled to $1,166/oz."

"...the NUM is seeking a 60 percent hike, over 10 times the inflation rate, for entry-level workers. Not to be outdone, the more hardline AMCU has made the fight for "a living wage" its battle cry under charismatic president Joseph Mathunjwa and wants an increase of 150 percent."

""We believe the minerals of this country must now benefit the people," it added. But unless the wage talks reach an outcome that reflects the balance sheet realities, neither companies nor workers can salvage a gold industry crushed between a toppling price and climbing costs."
 

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pmbug

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I think listing them in this thread would be appropriate. It ties in with supporting the main assertion regarding the price of gold/silver necessary for sustaining (much less turning a profit) mines.
 

Aubuy

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When you close a mine who gets the shaft? :doodoo:
 
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Unbeatable

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More on the South African mining stuff, Benjamen mentioned...

The two big unions, the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (AMCU), have demanded pay increases of 60% and 100% respectively.
In addition to this, over the past five years, wages have increased by an average of 12.3% per year, compared with an average inflation rate of 5.9%.

During the same time, gold production fell by 21%. Last year, the average worker produced 1.18kg of gold. In 2007, that figure was 1.49kg.
an ounce of gold would cost nearly $1,400 to produce. At a time when the gold price has fallen to about $1,200, this makes many mines unprofitable.
http://www.bbc.co.uk/news/business-23249467


Edit: The same article also says...

In 1970 South Africa accounted for 79% of world production - in 2012 it was 6%

South Africa still has 50% of known global gold reserves
That seems incredible but I don't think it's true, another source ranks it third behind Canada and the USA.

http://www.visualcapitalist.com/portfolio/global-gold-mines-and-deposits-ranking-2012
 
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bushi

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another one bites the dust:
http://lcn.freedgold.com/2013/06/no-jolly-up-for-mining-companies.html
GOLDEN, Colo., June 21, 2013 /PRNewswire/ -- Golden Minerals Company (NYSE MKT: AUMN); (AUM.TO) announced that it has suspended operations at its Velardena mine as of June 21, 2013, in order to conserve the asset until operating plans and prices for silver and gold indicate a sustainable cash margin for operations.
wheew, it goes much quicker that I've anticipated!
 
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