Gold’s ‘All-In’ Cost Measure Will Spur Investment, WGC Says

The World Gold Council, a U.K.-based industry group funded by producers, said new methods for reporting mining costs will help spur investment.

The WGC today published guidance on presenting “all-in” costs to give investors a better understanding of producers’ profit margins and help them compare performance. Such expenses exceed traditional cash costs because they include outlays such as capital spending, administration and exploration.

“There is that desire for further consistency and transparency on costs,” Terry Heymann, director of responsible gold at the London-based council, said by telephone. “There have certainly been a lot of calls from the investor community for a new form of reporting that looks at all-in costs.”

Gold producers, whose stocks have underperformed the precious metal for the past six years, are seeking to lure back investors after money-losing takeovers and budget blowouts sapped returns. Cash costs averaged $771 an ounce in the first quarter, 43 percent higher than two years earlier, according to data from 12 of the biggest miners compiled by Bloomberg.

That measure of spending gives a misleading impression of producers’ expenses, said Nick Holland, chief executive officer of Gold Fields Ltd., the world’s fourth-biggest producer of the metal before it spun off some South African assets earlier this year.

“Governments, communities, employees all had the view based on the way we reported that we were making a lot more money,” Holland said in a phone interview today. “We didn’t communicate what it really cost to produce an ounce of gold.”

Gold Fields has reported an all-in figure termed notional cash expenditure since 2008, Holland said.

“It does provide further transparency and help people understand the economics of gold mining,” the council’s Heymann said. Investors have been seeking “a more consistent metric,” he said.

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