"The large miners are looking of mines where the cash cost can be under $100/oz."
I understand. But, I'm hard pressed (and I've researched a bunch of projects)to find where such deposits exist (I call them "tooth fairies"). I doubt if even our company Pangea has any. The most successful advanced stage projects (what few there are)seem to be more at $150-175, or even 200 expected cash costs, or if under $150 are smaller oxide deposits. Nobody even bothers with sulfide deposits with POG under $325 or even $350. Everybody talks about starter oxide pits, but then what comes after that's mined out. Answer: $200 or higher ore.
The other variable is the exploration and capital cost. Even the luckiest exploration ends up running $25 an ounce. Almost all the under 150 cash costs projects are in remote regions where capital costs are high. Even ABX's highly touted Pascua talks about INITIAL cash costs of 125, but LIFE OF MINE cash cost of 150. Capital costs will be $ONE BILLION, or at least $50/oz. And,if you read the histories of some recent development efforts in these places, you find constant delays and problems that add to the expected budget.
The point is that these low cost reserves are not being replaced with POG under 300. The posters that have tried to debate my premise, keep coming back with the same small handful of projects. To them I say "show me the money". I'll stick to my point and restate it slightly for more clarification: "The strategy of bringing on line deposits (Pascua example) with total production costs (cash costs, exploration costs, and capital cost of $250), and then hedging out three or four years (brings in maybe $350 now) will in the end doom these companies. Most deposits are already doomed because total costs are well over $300.
Frankly I think these companies now realize this fact, and that's why these announcements are being made. I predict ABX joins the party. This will be extremely significant and bullish for POG. |
