Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Canada’s most-awarded
newsroom for a reason
Stay informed for a
lot less, cancel anytime
“Exemplary reporting on
COVID-19” – Herman L
$1.99
per week
for 24 weeks
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Every day ROB Insight delivers exclusive analysis on breaking business news and market-moving events. It is available only to subscribers of Globe Unlimited.

Gold miners are finally acknowledging they've put too much of a shine on their numbers in the past. Yamana Gold Inc. and Goldcorp. Inc. both recently said they'll start disclosing more information about their true costs going forward. Others are expected to follow. The change is long overdue, but stops well short of telling the full story.

Miners like to talk about their "total cash costs" but those numbers don't represent the full cost of digging and processing the metal. As ROB Insight noted last November, total cash costs exclude general and administrative expenses, basic maintenance and capital expenditures to sustain facilities and mines, corporate taxes and even the cost to shovel out dirt that contains no gold. Some argue the cost of exploration should also be included since that helps miners maintain production levels.

Story continues below advertisement

Stifel Nicolaus analyst George Topping notes that while total cash costs for Canadian miners Barrick Gold Corp, Goldcorp., Kinross Gold Corp. and Newmont Mining Corp. ranged from roughly $500 (U.S.) to $600 per ounce in 2012, their "real total cost" by his calculation ranged from $1,730 to $1,880 – an important consideration given that exceeds the gold price and means they're earning "marginal or negative free cash flow after dividends are paid." Raymond James analysts have found a similar gap in their calculation of the average cash cost per ounce for gold miners they follow ($740) and "all-in-costs" (around $1,300).

The World Gold Council, representing gold miners, has heard the complaints and is pushing to develop a new "all-in sustaining cash cost" measurement that would better reflect the costs. The problem remains, however, that this measurement excludes key numbers such as net interest expense, taxes and new project capital expenditures – all costs that affect cash flow. In its 2013 guidance, Goldcorp says its all-in sustaining cash cost will be $1,000 to $1,100 per ounce. When you add the missing figures, Mr. Topping estimates Goldcorp's true costs will actually top $1,800.

Raymond James analyst Brad Humphrey argues this is a good start – at least gold miners are acknowledging they need to improve their reported numbers. There is arguably no better time to fix their accounting than now, when interest from investors is waning and royalty taxes in such places as Ghana and Ivory Coast are potentially on the rise. The short to medium term effect might be negative, but would bring more realistic expectations along with more rigorous and effective cost management. Gold sector financials don't need a buffing, but rather a proper cleaning.

Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies