At investor conferences the industry often extolls its cash cost performance — that we are making significant operating cash flow margins – sometimes in excess of $1,000 an ounce.
Who are we trying to kid? We don’t kid the investors because they know how much cash we really generate after everything is accounted for. The sell-side also understands this.
The only people we’re kidding are governments and communitities who, not surprisingly, say okay, you’re making super profits, please pay up. And before we know it we have windfall taxes, higher royalties and so on.
We’ve got to change the lens through which we and the world view this industry, and start talking about what it really costs to produce an ounce of gold…to talk about cash costs only is not telling the full story.
It is like scoring an own goal every time you play, and being proud of it!
…unfocused sustaining capital spend can destroy a company’s ability to provide investors with leverage over the gold price…Don’t get mixed up in the debate on what is sustaining, replacement or growth capital. It’s all going to end up in the same bucket because, at the end of the day, what has the industry done over five years? The top eight companies have not grown. All capital is sustaining capital. That is the reality of our business today.