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@cheerful Yes it's surprising what those innocent looking numbers can actually tell you. You do however make a cracking point about LOM and that HUM growth plan depends very heavily on extending the current LOM at Yanfolila otherwise production will be going down not up. Of course we do know HUM actually has a good delivery record to date, but these are very difficult times so nothing is a given.
Thanks for a great conversation on AISC, I learnt a lot from this. I also had fun playing around with a spreadsheet and now see it’s a surprisingly straightforward calculation.
I’m curious about the resequenced mine plan this year which may in part account for reduced production. I don’t think it’s ever been explained. Are HUM going for lower grade material while prices are good to help extend the life of mine? Looking at the latest presentation it brought home to me just how urgent the drilling campaign is. Current pits are scheduled to exhaust themselves in 23 and 24....
I’m tempted to follow others a buy a few more. However I’m pretty committed already here. The coup was a reminder its high risk proposition at least until the other mines come online. Decisions decisions
@Ash. Okay I'm with you now I was looking at oz produced not oz sold ... so the comparative picture:
Q3 produced = 24,722oz & Sold = 23,794oz @$1,919/oz or $45.66m gold sold where AISC = $1,283 so $30.5m 'AISC costs'
Q2 produced = 25,054oz & Sold = 31,520oz @$1,663/oz or $52.4m gold sold where AISC = $983 so $31.0m 'AISC costs'
Q1 produced = 30,282oz & Sold = 24,575oz @$1,568/oz or $38.53m gold sold where AISC = $875 so $21.5m 'AISC costs'
Commentary: So assuming I've now 'got it' the AISC related cost in Q2 & Q3 are very similar, but each around 50% higher than Q1 everything else being equal. The 'kicker' then is that the SP rose after Q2 results as gold sales were well above Q1 but fell back in Q3 as oz produced dropped even as the gold price rose.
However you look at it gold sold or produced for Q1 to Q3 is around 79/80koz leaving Q4 to produce and sell around 31koz to meet or (just) exceed minimum BoD guidance. Also since Q1 end AISC related costs are running at +$10m so it will be interesting to see what has been driving that and if it can be brought back down or is now 'baked in'?
APR
apr / ASH
Thank you for enlightening us about AISC and kindly continue your intellectual discussion.
Hi APR, as I mentioned in one of my earlier posts, the total costs in Q3 were less than Q2, but when you divide by the ounces sold, you get a much higher AISC in Q3 because the sales were under 24k oz compared to 31.5k oz sold in Q2.
The higher AISC is nothing to do with costs being out of control, it is just a simple metric of the lower sales.
Confusing, eh?
Cheers, Ash
@Ash Interesting as Q2 and Q3 production was very similar but AISC was $300/oz higher in Q3 than Q2 implying a massive change in costs between quarters. Q3 report talks about $5m spent in Q3 on exploration so that seems the likely culprit. As we are awaiting eth Kourossa licence and Dugbe is being progressed via Earn-In how much more exploration costs are likely in Q4?
To put investors minds at ease HUM could easily have highlighted the additional costs as in-quarter one-offs and outlined forecast costs but chose not so.
Aprogerson, thanks for the additional info, but the concern I had was why had AISC gone up by an alarming $300 from Q2 when broadly there was the same level of production. M20ASH provided the answer. The consistency of the free cash amount per Ozs is somewhat reassuring but if costs were really getting out of control as it had first seemed to be, then relying on an escalating gold price to retain free cash margin would be a recipe for disaster. Will be interested in their plans to reduce costs going forwards.
I think you will find that to hit the lowest part of the production guidance 31K ozs in Q4 will be required which should be achievable.
Hi APR, no one's saying it is a measure of sales. It's the all in sustaining cost per oz sold, not per oz produced, so if your costs remain the same, but you sell less, your AISC increases and vice versa.
Cheers, Ash
Sorry chaps AISC has nothing to do with sales, but everything to do with direct costs, so that various miners cost bases can be compared on a like-for-like basis without any accompanying spin. It was introduced by the World Gold Council in 2013.
All-In Sustaining Costs = Cash Costs (incl. by-product credits) +Sustaining Capital +Exploration expenses + G & A expenses.
Commentary: Q3 AISC was not good news but 'free cash' before other costs has been consistent
Q3 AISC = $1,283 & Realised Gold price = $1,919 so 'free cash' before other expenditure = $636/oz
Q2 AISC = $983 & Realised Gold price = $1,663 so 'free cash' before other expenditure = $680/oz
Q1 AISC = $875 & Realised Gold price = $1,568 so 'free cash' before other expenditure = $693/oz
The real issue is the drop in production where Q1 = 30.3koz, Q2 = 24.1koz and Q3 = 24.7koz so if Q4 production is similar to Q3 then full year production will be 103.8koz vs. 110koz lower end of guidance.
Q3 Results maintained 2020 production guidance @110koz - 125koz implying Q4 production of minimum 41koz which seems IMHO somewhere between quite a stretch and fanciful.
Note: AISC excludes indirect costs of mining such as dividends, tax, financing or interest payments and gives no view of LOM or the BoDs delivery track record.
APR