GOLD’S PRICE SURGE: IT’S ALL ABOUT THE COSTS

The Gold market is roaring and achieving price levels that were only a pipe dream. So why has Gold reached these absurd levels?

Is it because the fear of the collapse of global economies and Gold as a safe haven for when the hackers finally reduce everyone’s bank accounts to zero and all bank and institutional records destroyed? What is it? Well, the reality of it, is, that the cost of producing a single ounce of Gold from day one of becoming a gold player is the prime mover of these gold prices. It’s driven by costs, and the costs in the last 20 years has more that trebled.

Tradesman, e.g. diesel fitter:

2004: $40hr
2024: $110-$120hr plus accom/air fares roster 2 weeks on 1-2 weeks off.

2004: Junior Geologist:

$80k year on staff, contractor: $90 day.
2024: $600 per day

2004: Senior Geologist:

150k year on staff, contractor: $200 day.
2024: $1,000-$2,000 day

Metallurgists, Mining Engineers, Surveyors, Mill Operators, Mine Manager’s, Heavy Duty Earthmover Operators, all in such demand that they tell the mining company what they expect $$, not the other way around. The way the uptrend of costs is going north are due to a multiple number of reasons as well as above, fuel, personal costs of living etc.

I can see gold nudging $US5,000 an ounce by end 2025 for reasons above and geopolitical global concerns and the cost per ounce at $US4,000 ounce. The only way for gold producers to bring down costs is mergers and or acquisitions, or both, hostile or otherwise. The need is to reduce the numbers of producers, thereby reducing the quantity of the highly technical people. The current trend of costs is the mining companies no longer control their destiny.

Most ASX listed company directors, today are made up primarily of lawyers and accountants with a sprinkling of geologists and mining engineers to look rounded. Most directors would not know what a metre of diamond core drilling would cost at 500m Depth or a cost of an RC hole at 100m for a pre collar. Any IPO that today raises less than $A25m will fail within the first 3 years of IPO day or have so much stock out, through continued capital raises to stay solvent, will be a dead pup! Today a serious IPO (not a lifestyle ASX company) will preferably need more than $A50m and have gold grades that can sustain the high costs of production and have a board of directors that are hands and experienced at “ore face”.

Stockbrokers need to employ experienced Gold mining analysts they have lived the industry, not desktop jockeys with no hands-on experience.

Goldman

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