The gold industry has been built on the leveraging of debt and energy. The days of using human and animal labor to produce the precious yellow metal are long gone. While some gold is still mined the old fashion way, the overwhelming majority is produced by using colossal-sized mining equipment, massive amounts of capital, energy, and materials. Thus, the global gold supply comes via a very complex industry with a lot of moving parts. When one of these critical parts are in short supply or removed, then the entire gold supply system disintegrates.
An example of one of the newest complex gold mines in the world is the Pueblo Viejo Mine in the Dominican Republic, owned by Barrick (60%) and Goldcorp (40%), which cost a staggering $3.7 billion to build. The Pueblo Viejo Mine started production in 2013 and is now running a full capacity. Gold production at the Pueblo Viejo Mine is over one million ounces per year. According to Barrick, it’s cost of sales at Pueblo Viejo was $564 an ounce in 2016. However, cost of sales does not include ‘all costs.’ We must also factor General and Administrative, Exploration-Evaluation, Mine Closure and Income Tax expenses.
This post was published at SRSrocco Report on OCTOBER 18, 2017.
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