Goldcorp
At a time when gold investors have an eagle eye on production costs, Goldcorp is adopting a new cost model, dubbed the 'all-in' cost, that accounts for a number of different expenses that are excluded from the simple cash cost model.
Currently, cash costs add up the resources required to produce an ounce of gold at this moment (labour, energy, etc.). The new 'all-in' cost, includes the likes of capital expenditures, corporate general and administrative expenses and exploration expenses to account for other costs that also affect cash flows.
The move to adopt this new metric comes after much lobbying from the World Gold Council, which has devoted substantial resources to lobby gold miners to change their ways. The Council spent a decent amount of time at the last Denver Gold Forum to stress the virtues of the all-in cost.
Some CEOs are already on board with the new metric. At the Forum last year, Nick Holland, the CEO of Gold Fields Ltd., urged his peers to "stop kidding ourselves" by reporting "cash costs" of mining gold that can hover around $500 an ounce.
So just how much higher will the reported cost per ounce jump? Next year Goldcorp expects all-in sustaining cash costs of $1,000 to $1,100 per ounce, up from the $700-to $750-per ounce on a co-product basis under the old model in 2012.
However, you have to wonder if the miner hopes that reporting under the new model will in some way distract from the underlying cost increases across the industry. By adopting a new model, it will be harder for analysts and investors to compare new, higher costs to the old accounting methods.
That being said, Goldcorp acknowledged in its production update that "cash costs are expected to rise from 2012 levels primarily due to industry-wide cost inflation and the impacts of lower grades and by-product production at Peñasquito." It also reported its all-in sustaining cash cost for 2012 of $865 per ounce, much lower than the $1,000 to $1,100 per ounce that is expected next year.
Tim Kiladze