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Grade-cost relationships within Australian underground gold mines – A 2014–2017 empirical study and potential value implications

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  • Ulrich, Sam
  • Trench, Allan
  • Hagemann, Steffen

Abstract

Quantitative analysis of publicly reported quarterly cost data from 23 Australian underground gold mines in the period 2014–2017 identifies consistent, statistically significant, relationships between gold grade and costs at the individual mines. Higher gold grades are associated with lower production costs throughout the dataset. The resultant regression lines for individual mines in their simplest mathematical form are a power function (f(x)=axb), where a is the scaling factor and b the rate of growth or decay in the grade-cost relationship. The general formula for the relationship between average feed grade and All-in Sustaining Costs (AISC) on a mine-by-mine basis is:

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  • Ulrich, Sam & Trench, Allan & Hagemann, Steffen, 2019. "Grade-cost relationships within Australian underground gold mines – A 2014–2017 empirical study and potential value implications," Resources Policy, Elsevier, vol. 61(C), pages 29-48.
    • Handle: RePEc:eee:jrpoli:v:61:y:2019:i:c:p:29-48
    DOI: 10.1016/j.resourpol.2019.01.009
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    References listed on IDEAS

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    1. Lilford, Eric V., 2017. "Quantitative impacts of royalties on mineral projects," Resources Policy, Elsevier, vol. 53(C), pages 369-377.
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    Cited by:

    1. Baur, Dirk G. & Prange, Philipp & Schweikert, Karsten, 2021. "Flight to quality – Gold mining shares versus gold bullion," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 71(C).
    2. Mazzarano, Matteo, 2020. "Estimating total potential material recovery from EEE in EU28," Resources Policy, Elsevier, vol. 68(C).
    3. Cox, Benjamin & Innis, Sally & Mortaza, Adnan & Kunz, Nadja C. & Steen, John, 2022. "A unified metric for costing tailings dams and the consequences for tailings management," Resources Policy, Elsevier, vol. 78(C).
    4. Walsh, Stuart D.C. & Northey, Stephen A. & Huston, David & Yellishetty, Mohan & Czarnota, Karol, 2020. "Bluecap: A geospatial model to assess regional economic-viability for mineral resource development," Resources Policy, Elsevier, vol. 66(C).
    5. Baur, Dirk G. & Trench, Allan, 2022. "Not all gold shines in crisis times — Gold firms, gold bullion and the COVID-19 shock," Journal of Commodity Markets, Elsevier, vol. 28(C).

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