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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Edmund Lee who wrote (21937)	10/19/1998 12:12:00 PM
From: Alex	Read Replies (1) \| Respond to of 116764

One mine, three cash costs By KATE ASKEW - Resources Writer Tough times in the Australian gold industry have seen cash costs replace production rates and exploration upside as key investment criteria. Companies have foregone acquisitions and new developments as they strive to be as low as possible on the cost curve. As a result, cash costs have fallen markedly in the past year. Or have they? Surbiton Associates, an independent surveyor, estimates cash costs of Australian goldminers now average $320 an ounce, a major reduction from a year ago. But PricewaterhouseCoopers mining partner Mr Tim Goldsmith feels comparisons are difficult to draw because gold miners do not follow the same accounting procedures to calculate costs. The Boddington goldmine in Western Australia is a good example. Its three owners, Normandy Mining, Acacia Resources and Newcrest Mining, all report different cash costs from the same operation. Mr Goldsmith suggests the Australian goldmining industry should adopt the US Gold Institute Standard. "The US gold institute standard is a good start, but does not in itself provide comparability of producers ... the reader will need to understand the basis on which cash costs are prepared." The goldminers see a benefit in levelling the playing field with their peers, but a standardised accounting systems offers the most benefit to investors because it makes companies more transparent. "It's very important to have consistent cash cost reporting standards," Delta Gold managing director Mr Terry Burgess said. Delta has used the US Gold Institute standard since mid-1997, as has Normandy Mining. Cash costs include normal operating costs of a mine, while non-cash costs include depreciation of capital expenditure items. While this sounds straight-forward, it is not always the case, with items such as variations in stripping ratios and ongoing underground development costs falling into either cash or non-cash costs. Australian companies also feel they are unfairly treated compared to North American counterparts because they report contracting fees as part of their cash costs. In the US where contractors are rarely used, mining fleet can be depreciated over the life of mine, which is not reported as a cash cost. As well, gold reserves can be calculated based on the average gold price from their hedge book, which means life of mine can be increased by increasing mineable reserves, which lowers depreciation charges (made over the life of mine) on an annual basis. smh.com.au