WGC: All-in sustaining costs continue to rise
Following a blockbuster Q3 earnings report from Newmont that highlighted rising costs amid record revenue, the World Gold Council released a report Monday on the trend of costs experienced by mining.
The report shows average AISC in Q2 grew 1% quarter-over-quarter and 6% year-over-year to about $1,388 an ounce. Gold traded at all-time highs Wednesday morning at the $2,780 level.
The data, updated through June 2024, shows cash operating costs have decreased 2% quarter-over-quarter to $938 an ounce, but compared to last year had risen 5% year-over-year.
The report cites heightened oil prices, which though have been trending downward, remain higher than prices from a few years ago, and an expectation of further hikes as cause for the rise in AISC.
It also mentions labor costs, which in Australia rose 4% year-over-year, and has been experienced in other parts of the world, including at Newmont operations in Argentina and Ghana.
“Harmony disclosed a 9% year-over-year rise for H1’24 for its operations in South Africa and Papua New Guinea,” wrote Sarah Tomlinson, Director of Mine Supply at Metals Focus.
Many gold mining companies are set to release Q3 earnings next week.
Though the report states royalties and production taxes are only about a 6% share of total all-in sustaining costs in Q2, governments increased their take as gold prices continue to make all-time highs. According to the report, royalties grew 17% quarter-over-quarter and 22% year-over-year. Despite the heavy rise, royalties appear to have increased in lockstep with gold prices since at least 2015.
Due to the extreme rise in the average quarterly price in gold, however, Tomlinson noted a bit of relief received by gold producers.
“To borrow a phrase from footballing parlance, Q2 really was a game of two halves: on the one hand, AISC costs continued to rise, but on the other, AISC margins climbed, providing a welcome buffer. As discussed, the underlying causes of cost escalation in Q2 were diverse and it will be interesting to see if this scenario continues in Q3. Will costs finally start to come down, or will they, as in the words of the singer Kate Bush, keep ‘running up that hill?’”
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