What is the true cost of a gram of gold?
As a seller of gold paydirt, I am always amazed at the lack of information and poor logic exercised by amateur gold mining “experts” as they excoriate a paydirt seller who guarantees a gram of gold for $49 when the spot price is also $49.
“False advertising!” they cry! “He can’t possibly be selling gold for the same price as the spot price!”
On the surface this statement may appear to be true, and anyone selling their gold at cost will not be in business for long.
However, where their logic falls apart is that they are assuming that the cost to mine an ounce of gold is the same as spot price…it is not!
We all talk about the spot price of gold, but many don’t understand what the spot price is. Quite simply, it is the going price to buy and sell an ounce of gold on the open market. http://www.kitco.com/charts/livegold.html
For us little guys, we deal in grams rather than ounces and a gram is far less expensive than an ounce. (31.1 grams per Troy ounce)
Gold mining on a large scale is extremely expensive, full of risk, and subject to the increases and decrease in the spot price of Gold on the world markets. Many a large gold mining company has gone out of business due to falling gold prices.
In fact, if you read financial reports of the larger gold mines that are required to publish their operating costs, you will find a term called “all-in sustaining costs (AISC).
“All-in sustaining costs take into account all the pertinent costs of mine maintenance (on-site mine and administrative costs, royalties and production taxes, byproduct credits, permitting costs, smelting, refining, and transport) as well as behind-the-scenes costs that aren't often associated with on-site mining but still factor into overall expenses. These include corporate general and administrative costs, sustaining exploration and study costs, sustaining capitalized stripping and underground mine development, and sustaining capital expenditures, to name a few.” https://www.fool.com/investing/2017/04/21/3-gold-stocks-with-the-lowest-all-in-sustaining-co.aspx
Simplistically speaking, this is the term used to describe the total operational costs to get gold out of the ground and into doré bars. (Not yet refined to 9999 finegold)
Such research will find that typical AISC costs in 2017 ran about 50% of the spot price of gold.
So, if the spot price on a gram of gold is $46, it costs the large mining operation about $23 to get it out of the ground. They then can sell their doré bars to a refiner. By the way, the refiner does not pay spot price either because of the impurities in raw gold, the purity level can run anywhere from roughly 50% to over 93% purity. (100% pure gold does not exist in nature) The refiner will first assay the gold to see what it is worth before making an offer to buy from the miner.
Consider this list of All-in Sustaining Costs for some of the largest gold mine corporations in the world: Note: in 2016 when this data was reported, the spot price was around $1300/oz.
Barrick Gold(NYSE:ABX): $745 an ounce.
Newmont Mining: $970 an ounce.
Goldcorp(NYSE:GG): $850 an ounce.
Agnico Eagle Mines: $875 an ounce.
AngoGold Ashanti: $1,075 an ounce.
Kinross Gold: $975 an ounce.
Gold Fields: $1,020 an ounce.
Yamana Gold: $900 an ounce.
B2Gold: $955 an ounce.
Eldorado Gold (NYSE:EGO): $860 an ounce.