Cost of producing gold among large-scale mining producing firms, represented by the All-in Sustaining Cost (AISC) averaged $1,418 per ounce of gold in 2021, surpassing global average of $1,068 per ounce of gold, according to a report by the Ghana Chamber of Mines.
The average AISC per ounce of the Chamber’s producing member companies showed a significant rise from 2020 figures ($1,190 per ounce of gold) to $1,418 per ounce of gold which reflects a rise of more than $200 per ounce of gold (24.39% rise).
The AISC, which is a proprietary metric of the World Gold Council (WGC), measures production and other costs related to sustaining current gold production and capital expenditure.
The extent of rise in production cost was attributable to a broad increase in the AISC of member companies, which was partially balanced by the decline in the production cost of Abosso Goldfields Ltd.
These high costs also coincided with higher a decline in output. According to the Chamber of Mines, the trajectory of growth in output is expected to rise.
“In 2022, we expect most of the mines to operate at a steady-state level and thereby address the challenges that confronted their operations in 2021. In that regard, we project an increase in gold output of the producing member companies to a range of 2.9 million ounces to 3 million ounces in 2022.”
Chamber of Mines
Cost Per Ounce of Gold at Various Mines
The AISC per ounce of Newmont’s Ahafo and Akyem mines increased by 10.61 per cent and 20.61 per cent respectively. The growth in Ahafo Mine’s AISC from US$980 per ounce in 2020 to US$ 1,084 per ounce in 2021 was largely due to an increase in cost applicable to sales, exploration expenditure, and COVID-19-related costs.
The upturn in cost applicable to sales stemmed from unfavourable strip ratio and increased diesel and electricity prices, which was moderated by the reduction in expenditure on mining consumables.
At the Akyem mine, the rise in AISC from US$ 757 per ounce in 2020 to US$ 913 per ounce in 2021 was due to a combination of a rise in the cost applicable to sales, sustaining capital costs as well as reclamation expenditure.
In turn, the elevation in cost applicable to sales was attributed to higher royalty payments arising from the modest increase in the price of gold as well as an increase in the costs of diesel and maintenance.
With respect to the Tarkwa Mine of Gold Fields, AISC rose from US$ 1,017 per ounce in 2020 to US$ 1,155 per ounce in 2021. The 13.57 per cent increment in production cost was driven by an increase in capital expenditure and cost applicable to sales as well as a reduction in gold production.
Conversely, the AISC of Damang Mine, also owned by Gold Fields, fell from US$ 1,008 per ounce in 2020 to US$ 802 per ounce in 2021 due to the higher volume of gold sold and lower cost of sales (before amortization and depreciation). The moderating factor on the 20.41 per cent reduction in cost was an increase in capital expenditure.
Similarly, the AISC of the Iduapriem Mine of AngloGold Ashanti increased from US$ 985 per ounce in 2020 to US$ 1,619 per ounce in 2021, representing a growth of 64.37 per cent. The expansion in the mine’s AISC was ascribed to an increase in cash cost, reduced production, and stockpile movements.
The AISC of Asanko Gold Mine, the joint venture mine of Galiano and Gold Fields, rose from US$ 1,115 per ounce in 2020 to US$ 1,431 per ounce in 2021. The 28.34 per cent upturn in cost was attributable to an increase in cash cost, non-sustaining capital, and exploration expenditure.
In turn, the growth in the cash cost was due to the elevation in expenditure on fuel and mining costs, with the offsetting factor being the reduction in royalty payments arising from the decline in production.
At the Wassa Mine of Golden Star Resources, the rise in AISC from US$ 1,003 per ounce in 2020 to US$ 1,170 per ounce in 2021 was explained by lower production volumes, as well as higher cash operating cost, and sustaining capital expenditure. The 16.2 per cent growth in AISC was partly compensated by the production-induced reduction in royalty payments.
Cost Trajectory at Perseus, Kinross and Adamus Mines
The AISC of the Edikan Mine of Perseus Mining Limited, grew by 14.44 per cent to US$ 1,324 per ounce in 2021 from US$ 1,157 per ounce in 2020. The increase in production cost was primarily caused by the reduction in output as well as an increase in processing cost and sustaining capital expenditure.
Kinross’ Chirano Gold Mines recorded an expansion in its AISC from US$ 1,326 per ounce in 2020 to US$ 1,490 per ounce in 2021. The 12.39 per cent upturn in cost was ascribed to an increase in energy cost and contractor-induced rise in cost applicable to sales, which was partially offset by the decline in the quantum of gold sold (equivalent ounces).
The AISC of FGR Bogoso Prestea Ltd and Adamus Resources Ltd rose from US$ 2,393 per ounce in 2020 to US$ 3,355 per ounce in 2021and from US$ 1,226 per ounce to US$ 1,770 per ounce in the same period respectively.
Ultimately, whether costs will remain elevated, is partly attributable to the outturn of the Russia-Ukraine crisis and the volatilities in the commodities market as well as the impact on cost of energy and other inputs.
