cost per ounce in the ground The analysis of a company should include the valuation of costs in the ground for reserves as well as for resources. It is one of many key numbers.
We just need to be careful about the companies that tout this number. It needs to be looked at in terms of political location, geographic location (remote or near infrastructure), richness of ore (grams per ton), hardness of rock, likely recovery rates, financial circumstance of company as well as quality and greed of management.
In particular, low grade deposits are now out of fashion because they cannot many real money with $1,400 gold.
Illustration;
Company A 1.0 grams per ton 200,000 ounces annual production; All In sustaining costs $1,000
Company B 0.8 grama per ton 160,000 ounces annual production; All In sustaining costs $1,250
Company C 0.6 grams per ton 120,000 ounces annual production. All In sustaining costs $1,500
Profits would be
A $80m $60m after corp tax
B $24m $18m after corp tax
C minus $20m after corp tax also minus $20m
Recovery rates would be lower for lower grades so in real life the situation for Company C would be a little worse.
Point; The "ounces in the ground" cost means little except for holding it long term until gold prices go up. Gold prices would need to be at least $1,800 to even consider constructing a mine for Company C.
The illustration indicates the challenge and perception facing LSG. Yes, it will survive but it will be on the edge until gold prices rise by a few hundred dollars.
Mat