Replies to post #20184 on Comstock Inc (LODE)

[TMLonggun]

This is far better than the industry average.

No it isn't. Lester I know you have to be biased no matter what but lets keep things a little bit honest and factual please.

Lode mined 13,117 oz for 10.4 M costs directly attributable to mining, or just under $800/oz - this is nowhere near what it actually costs lode to mine an ounce of gold. Costs applicable to mining is not the same as the AISC to mine an ounce. If lode had good AISC they would brag about it and promote it instead of omit it.



Someone can correct me if I am wrong but I don't think lode even lists their proper cash costs. They report "costs applicable to mining" which out of hundreds of miners I have followed and studied lode is the only one I am aware of that does this on ongoing basis. As far as I can tell they only report the first two numbers in the above table (not even full cash costs) to make themselves appear more profitable than they are. Lode is like a 500 pound man and someone asks him "how much do you weigh?" and he replies, "I have low cholesterol." "Sure, but how much do you weigh?" and the man just replies with "I am very healthy!" The observer walks away wondering "Really?"

Being better than the average is not a badge of honour when the average is terrible.



Look at some of the largest miners in the world with huge economies of scale that are impossible for lode to replicate.



AISC for gold miners

"AISC for various miners depends on the grades, efficiency, and geographical breakdown of assets. The average AISC for eight significant gold miners for 2015, as guided, is $950 per ounce compared to $900 per ounce for 1Q15. This cost excludes interest charges, impairment, and taxes. So including these charges, the margins for miners are very thin." [Meaning even if lode's numbers were good they are still not in great shape atm.]

"As the above graph shows, Iamgold Corporation’s (IAG) AISC guidance for 2015 is the highest at $1,125 per ounce. Next is Kinross Gold (KGC) at $1,050 per ounce. In comparison, Newmont Mining’s (NEM) AISC guidance is $990 per ounce, Barrick Gold’s (ABX) is $877, and Goldcorp’s (GG) is $912.

According to a 2015 survey by Gold Fields Mineral Services Ltd. (or GFMS), gold miners’ average all-in costs, including interest and extraordinary costs, were close to $1,208 per ounce in 2014. This excluded the impact of impairments. The average gold price was $1,260 per ounce.

Because of such narrow margins and debt issues, Allied Nevada had to file for Chapter 11 bankruptcy in March 2015." [Note ANV was one of the best possible outcomes I envisioned for lode years ago.]

"The GFMS All-in-Costs parameter, which is even more all-encompassing than the All In Sustaining Costs (AISC) metric, which has become the industry norm for most gold mining company reporting, is intended to represent the ‘stay-in-business’ capital cost, or the expenditure necessary to maintain production at current rates. In addition to the components included in the Total Production Cost, the All-in Cost figure also incorporates corporate administration costs (head office overheads), interest charges, exploration expense, extraordinary charges (such as retrenchment costs and asset carrying value write-downs), plus sustaining/on-going capital expenditure. As such, GFMS reckons that its own All-in Cost calculations may be viewed as a far more accurate measure of ‘real’ industry margins even than AISC. Both measures though do go some way to explaining why companies which boast of their mines having exceptionally low cash costs can still end up making significant corporate losses.

This overall industry average cost reduction year-on-year sounds impressive, but GFMS comments further that this contraction is not wholly reflective of cost-cutting success in 2014; rather, it underscores the exceptional scale of industry asset impairments reported during 2013, when these extraordinary non-cash charges contributed $499/oz to the All-in figures as against far lower such charges last year. Excluding impairments, the trend in the All-in-Cost metric is considerably less volatile, with 2014 seeing only a $34/oz, or 3% year-on-year decrease. It also should be compared with an industry average gold price received of only $1,266 an ounce. (Last year GFMS calculated that 64% of the world’s gold mines had All-in Costs below this level – leaving more than a third of the global industry under water based on the GFMS All-in Costs metric and at current prices the percentage of mines in the red on the GFMS All-in basis will be considerably higher.)"

http://www.mineweb.com/regions/europe-and-middle-east/many-gold-miners-in-dire-straits-despite-costs-cuts/


http://marketrealist.com/2015/06/cost-gold-miners-digging-gold/

[saildone]

I ran across an article in Mining.com by Adam Hamilton titled the
"Gold miners’ $1200-cost fallacy"

In it he looked at the miners on the GDX and built tables showing both cash costs for mining and the all in costs. For the cash costs he found that they were "averaging just $649 and $620 in Q2’15 for the actual gold miners among GDX’s top 17 and next 17 component companies!".
And regarding the average AISC he said "industry-wide all-in sustaining costs per ounce were far below that $1200 threshold.  GDX’s top 17 component gold miners had average AISCs of $936, while the next 17 looked even better averaging $857."
He also noted that the companies conservatively project their future AISC in order to not disappoint.
CMI has begun to meet that kind of an average for cash costs and they project an AISC at about $1050 which I suspect is likely to be conservative. Looks like this is going to be a pretty harsh fourth quarter but it does look positive for next year.
I realize that startup miners usually, or at least often, do take more than five years to become profitable but I am really tired of saying maybe next year. Still the company has delivered on cash costs and after this round of exploration is completed I do think the AISC could be well below a thousand dollars.