Gold is getting cheaper
Drew Hasselback -- Financial Post
Gold is getting cheaper - at least when it comes to cost of digging it out of the ground.
A global study by AME Mineral Economics, an Australia-based consulting firm, concludes that the average operating cost of running a gold mine was US$156 an ounce in 2001, down 2.5% from the year before and about 25% cheaper than in 1997.
The study, released yesterday, predicts mining costs will drop to US$136 an ounce by 2006.
The AME survey is a compilation of results from gold producers from 24 countries representing 72% of the world's gold production.
In Canada, production costs have fallen 19% since 1997, though this has been offset by a 10% drop in the value of the Loonie against the U.S. dollar.
The rapid drop in mining costs is the result of an increase in production outside the main gold producing nations.
In 1990, 75% of the world's gold came from Australia, Canada, South Africa and the United States. Those countries now account for about 57% of production. Developing countries, such as Indonesia, Peru, Mali and Tanzania, have ramped up gold production and opened low-cost mines. The average production costs outside the four major gold producers is only US$100 an ounce.
Mining costs have also fallen due to costs savings generated through mega-mergers. Denver-based Newmont Mining Corp. is becoming the largest gold producer through its merger with Australia's Normandy Mining Ltd. and Toronto's Franco-Nevada Mining Corp.
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