RE: Let's put the guaranteed gold delivery debatelefmike,
I still can not understand the high cost production in Ezulwini mine.
According to my limited accounting analysis knowledge and common sense, it shouldn't be that high;
as one of our forum buddy says: mining gold from the ground shoud not cost that much digging the gold out from the ground !!!
I try to understand the components of the cost of production of gold per ounze with Ezulwini by looking into the detailed information of MDAA, but still can not make out the reasoning.
I know cost basicalyy comprising of direct cost and indirect cost.
direct cost in self explanatory, and indirect cost shoud include mainly the amortization in this case, but amortization does not really have that big a portion (percentage) in shaping the cost per ounce of gold of Ezulwini.
Hereunder is the extract from MDAA, if any body here can enlighten me again?? Thanks.
| Ezulwini Mine | Q1 2012 | Q1 2011 | %Change | Q4 2011 | %Change |
| Production |
| Tonnes milled | 164,265 | 132,963 | 24% | 152,395 | 8% |
| Average gold recovery grade (grams/tonne) | 2.79 | 3.3 | (15%) | 2.62 | 7% |
| Total ounces of gold sold | 12,893 | 13,753 | (6%) | 11,393 | 13% |
| Ounces of gold sold at full market prices | 7,681 | 8,087 | (5%) | 6,951 | 11% |
| Ounces of gold delivered into the Ezulwini Gold Stream Transaction | 5,212 | 5,666 | (8%) | 4,442 | 17% |
| Average proceeds from gold per ounce sold ($) | 1,069 | 866 | 23% | 852 | 25% |
| Average Cash Cost per ounce of gold sold ($)(b) | (2,344) | (1,467) | 60% | (2,227) | 5% |
| Average cost per ounce sold ($) | (2,447) | (1,582) | 55% | (2,215) | 10% |
| Pounds of uranium sold | 31,407 | 20,500 | 53% | - | - |
| Average uranium selling price per pound ($) | 61 | 41 | 49% | - | - |
| Financial (thousands of dollars) |
| Proceeds from gold and uranium sold(a) | 15,703 | 12,755 | 23% | 11,611 | 35% |
| Revenue from gold sold at full market prices(c) | 11,682 | 9,632 | 21% | 9,712 | 20% |
| Proceeds from gold delivered into Ezulwini Gold Stream Transaction(d) | 2,096 | 2,282 | (8%) | 1,899 | 10% |
| Revenue from uranium sold(c) | 1,924 | 841 | 129% | - | - |
| Cost of sales (excluding amortization) (a) | (32,143) | (21,022) | 53% | (25,374) | 27% |
| Costs related to gold and uranium production(c) | (20,751) | (13,707) | 51% | (16,407) | 26% |
| Costs related to gold delivered into Ezulwini Gold Stream Transaction(d) | (11,392) | (7,315) | 56% | (8,867) | 27% |
| Amortization(a) | (1,324) | (1,571) | (16% | 143 | - |
| Amortization related to gold and uranium production(c) | (788) | (924) | (15%) | 165 | - |
| Amortization related to gold delivered into MWS Gold Stream Transaction(d) | (536) | (647) | (17%) | (22) | - |
| Gross loss | (17,765) | (9,837) | 81% | (13,620) | 30% |
Notes:
(a) To be able to adequately report on the financial performance of the Corporation and its operations in this MD&A, the revenue and cost of production related to the gold ounces delivered pursuant to the Gold Stream Transactions have been added back to revenue and costs of sales, respectively, in this MD&A and are not included in the derivative expense related to Gold Stream Transactions in profit and loss as disclosed in the Financial Statements. Only the fair value movement on the derivative liabilities related to the Gold Stream Transactions has been included in the derivative expense in this MD&A. This is a non-IFRS measurement and investors are cautioned not to place undue reliance on it and are advised to read all IFRS accounting disclosures presented in the Corporation’s Financial Statements.
(b) "Cash Costs" are costs directly related to the physical activities of producing gold and uranium and include mining, processing and other plant costs; third-party refining and smelting costs; marketing expense, on-site general and administrative costs; royalties; on-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals such as uranium and silver are deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the "Gold Institute Production Cost Standard" applied consistently for all periods presented. The Gold Institute was a non-profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and revised in November 1999. Total cash costs per ounce is a non-IFRS measurement and investors are cautioned not to place undue reliance on it and are advised to read all IFRS accounting disclosures presented in the Corporation?s Financial Statements.
(c) Revenue and cost of sales (including related amortization) as disclosed in Statement of Comprehensive Income in the Financial Statements.
(d) Revenue and cost of sales (including related amortization) included in derivative expense related to Gold Stream Transactions in Statement of Comprehensive Income in the Financial Statements. Also see Note 11 to the Financial Statements