JOHANNESBURG (miningweekly.com) – The World Gold Council (WGC) on Thursday released two new methods of calculating and reporting gold-mining costs to improve clarity and provide greater investor understanding of the complete costs associated with the mining of gold.
The first method is an extension of the existing “cash cost” metrics and incorporates costs that are related to sustaining production, which the council refers to as the “all-in sustaining cost”.
The second method takes into account additional costs and reflects the varying costs of producing gold over the life cycle of a mine, which the WGC dubs the “all-in cost”.
WGC director Terry Heymann told Mining Weekly Online from London that the new metrics had been developed to help provide greater clarity and consistency to improve investor understanding.
WGC has worked closely with its member companies and beyond to develop the non-Generally Accepted Accounting Principles (GAAP) measures and expects them to be helpful to investors, governments, local communities and other stakeholders.
Companies, including non-WGC members, are free to use the metrics from January 1.
“Individual companies have responsibility for their own reporting, but we expect that many will use these new metrics, which provide further consistency for investors and other stakeholders,” Heymann told Mining Weekly Online.
The metrics are not formally regulated accounting measures and are intended to complement the existing accounts that companies already provide.
“It’s something I believe will be well received by the market and we hope that a wide range of gold-mining companies, including companies that are not WGC members, use it,” Heymann added.
WGC’s publication of the guidance note recognises the greater degree of scrutiny of the gold-mining industry and the need for a better understanding of gold mining’s complex economics.
They serve to make the costs more accessible at a time of plunging gold price and collapsing gold equities.
While they are not directly about making the potential gold-mining investment opportunity more attractive, they do provide a further degree of consistency for the making of investment decisions.
The gold institutes of old, which advocated the reporting of cash costs as a measure, have ceased to operate and with that has been less consistency in the way that cash costs have been applied.
The methodology incorporates costs additional to historic cash costs in response to the need for a full understanding of gold mining’s complete set of associated outlays.
Despite current market turmoil, the council remains positive in the long-term outlook for gold, against the background of ongoing central bank buying and the remaining lure of gold in China, India and much of Asia.