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New information suggests that the cost to produce gold is much higher than
what the market realizes. As the cost to produce gold has skyrocketed
over the past two decades, the mining industry has hidden certain costs by
placing them in their capital expenditures. This has lowered their
“Cost of Sales” figures but has significantly increased their capital
expenditures.
Furthermore, this massive cost shift has forced the gold mining industry
to tackle these big problems, with big solutions. However, these big
solutions come at a big cost. For example, as the average gold ore
grade has fallen substantially over the past 20 years, the gold mining
industry now has to move a great deal more ore to produce the same or even
less gold.
In order to move a great deal more ore, the mining industry has to spend a
lot more on trucks, tires, materials, energy, and labor. In my newest
video below, I show in detail the BIG CHANGES taking place in the top four
gold miners in the world:
I believe several of the charts in this video has never been seen
before by precious metals investors and alternative media community.
To understand why the cost to produce gold is higher than what the industry
has led us to believe, we have to focus on the massive amount of capital
invested by the gold mining industry.
Unfortunately, the investment of billions of additional dollars in capital
expenditures by the top gold miners has not kept production from
falling. Actually, the top four gold mining companies’ production
peaked more than ten years ago and continued to trend lower.
One of the charts in the video shows the enormous increase in the amount
of ore processed at Barrick’s Nevada Gold Mining Operations. In just 20
years, Barrick’s Goldstrike and Cortez Mines now how to process four
times, 24 million tons of ore, to produce the same amount of gold then they
did in 1998:
To understand the tremendous increase in capital expenditures and costs to
process four times more ore to produce the same amount of gold at Barrick’s
top mines, I highly recommend watching the video above. Moreover, I
provide additional cost analysis on the top four gold miners as a group.
The gold mining industry is plagued by rising costs in all areas.
While some of these costs have decreased over the past several years due to
a falling oil price, these costs will likely increase going forward as
ore grades continue to decline. Furthermore, as global oil production
begins to experience “Seneca Cliff” like declines in the future, gold
production will be negatively impacted, even with much higher gold prices.
Precious metals investors need to understand the changing “Energy
Dynamic” and its impact on the entire economy and financial system.
While the gold and silver prices continue to trend lower, this should not be
seen as a WEAKNESS, but rather as a STRENGTH.
Soon, the days of buying gold and silver at bargain basement prices will
be gone forever.
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