From ZeroHedge:
The Soft Cost Curves Of Hard Assets: Where The Cash Flow Hits The Road
Given the dramatic drops in gold and oil prices over the past few trading sessions, we thought it worth examining which miners and oil producers were most 'at risk' of generating negative cash flows at current and long-term prices. Goldman Sachs looks at 40 oil producers and 25 gold mines to create a complete 'cost curve' in terms of the best indication of what it actually costs to keep operations running. It is quite apparent that ~$85 Crude and ~$1150 Gold are key to the ongoing support for these industries.
Via Goldman Sachs,
Gold Cost Curve
We have ranked all 25 gold mines under our coverage on a gross cash cost basis – which includes all mining, processing and royalty costs as well our most recent estimate (in some cases reported) of additional costs such as deferred waste movement and sustaining capital. We look at these costs as the best indication of what it actually costs to keep operations running.
Of course, some particular assets are undergoing periods of particularly high capital expenditure (for example, Mt Rawdon), however by its very nature we assume this expenditure would be difficult to stop and also maintain existing mine life and production expectations. We also flag that cash costs do not often include a recharge for corporate overheads or exploration – which must surely come under scrutiny given the extreme decline in price.
We list the mines from the lowest cost operation to the highest, creating a cost curve. Typically companies with by-product credits, such as Cadia (run by Newcrest) rank lowest on the cost curve. In addition, higher grade operations also generally produce lower cash costs (and generally by extension the best margins).
The companies least at risk of generating negative cash returns at their operations are Regis, OceanaGold and Medusa (all Buy-rated stocks), whereas at the upper end of the curve are St Barbara’s two Pacific assets as well as Newcrest’s Hidden Valley and Bonikro mines.
2012 Costs
2015 (estimated costs)
Oil Cost Curve...MORE
