Head of large South African mining company says $2000 gold need to keep gold mines from shutting

Nick Holland, head of South African mine Gold Fields Ltd, has come out and said that soaring costs and shortages in labour mean that miners margins are going to be squeezed unless the gold price rises fast. From the article:

The wave of rationalisation that is starting to emerge among the major diversified miners will soon spread to the gold sector, as soaring costs and labour shortages begin to squeeze margins…

…Mr Holland criticised fellow gold producers for failing to include corporate and capital costs when publicising their profit margins, saying they were only fooling themselves and governments, who would duly seek to tap the industry for more taxes.

Mr Holland said rising energy, labour and production costs would virtually double costs in the next five years, and a gold price of close to $US2000 per ounce would be needed to keep pace.

If costs remain close to $US1600 where they have been in recent weeks, much of the industry would be “killed”.

So all that talk of $600-700 per ounce out-of-the ground costs that we hear about so often seems to be nonsense – in fact, if Mr Holland is correct, if prices don’t move higher and quickly, then the gold mining industry is going to get “killed”. This means mines shutting down and a choking off of supply dramatically.

This probably goes a long way to explaining just why the gold miners have had such a tough time of it the past year or so – basically it’s costing miners a lot, lot more to get that shiny metal out of the ground than they’ve been letting on.

HUI ‘gold bugs index’:

(click for sharper image)

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1. South African Gold Bullion Mines
2. Gold miners in South Africa to strike?
3. Greenland shows off its mining potential
4. Concern at the Comex – Texas Uni takes delivery of $1bn in physical gold are more large funds to follow?
5. Investing in Gold Mines

Link to this article: : http://www.goldmadesimplenews.com/mining/head-of-large-south-african-mining-company-says-2000-gold-need-to-keep-gold-mines-from-shutting-7545/

Posted by Thomas Paterson on Aug 2 2012. Filed under Mining. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.