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Some interesting opinion were expressed on here recently and as I don't have sufficient understanding of the subject I sought the advice of a very experienced and well respected independent mining analyst, certainly worth bearing in mind!
AISC is a very flawed metric that can easily be manipulated and does not reflect the true cost of mining.
- It is simplistic to believe that gold mines will be mothballed when they cannot produce at positive cash flow. There are a myriad of gold producers that have to go back to the market continuously for funding with gullible investors prepared to do.
- The AISC cost does not cover ALL cash outlays required to keep mining. See my note. An important component is hidden by classifying these as “growth”.
Suggestion at the end of the note to be able to compare the relative performance of companies.
Centamin stands out as one of the few companies that consistently generates positive cash flow and able to pay dividends.
What has Endeavour done?
Lately the company is doing very well, but the table below is for the period 1 April 2008 and 30 March 2019, which is extracted from working notes in a company valuation. Horrible history.
> Endeavour Mining Corporation
> Financial Performance From 1 April 2008 Until 30 March 2019
> Year Ending 31 Dec 18 months 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Totals
> US$'000
> Ore Mined 467 2,876 3,228 4,366 6,713 6,898 7,554 11,086 9,597 1,285 54,070
> Waste Mined 40,252 46,435 53,003 46,451 9,707 195,848
> strip ratio 5.84 6.15 4.78 4.84 7.55
> Total Milled/Stacked 467 2,496 3,307 4,211 6,304 7,171 8,383 10,791 9,948 1,815 54,893
> Grade 3.09 2.23 2.26 2.62 2.48 2.40 2.25 1.90 1.59 0.98 2.10
> Contained Gold 46,400 179,149 239,867 354,145 502,001 553,183 606,770 659,263 510,145 57,169 3,708,091
> Gold Produced 44,407 163,769 210,209 318,143 465,770 516,646 559,190 593,815 450,140 56,648 3,378,737
>
>
> Cash from Operations -11,179 -8,548 93,374 43,834 127,438 147,301 153,899 221,791 250,920 22,916 1,041,746
> Investments 83,640 -145,347 -180,226 -148,556 -112,881 -7,306 -180,177 -478,728 -453,319 -109,857 -1,732,757
> Financing -28,083 102,658 77,131 71,642 -27,166 -91,743 41,999 251,741 204,467 47,452 650,098
> of which Equity 579 2,706 6,012 2,720 73 0 185,285 107,755 -1,356 238 305,130
> Effect of X-rate 1108 -784 344 504 1,464 -912 -944 3,604 -748 -499 3,137
> Change in Cash
0
45,486-52,021-9,377-32,576-11,14547,34014,777-1,5921,320-39,988-37,776Cash at Year-end 167,300115,279105,90273,32662,179109,519124,294122,702124,02284,034
Thanks Mr T. I am afraid I lost the trail of your huge array of different numbers .
I am well aware of the capabilities of creative accounting techniques and also at mining companies propensity to use them .
AISC isn't perfect , nothing is , even in non mining sectors , however even though AISC is a non Gaap measure , companies are urged to include it to provide a greater transparency between mining companies .
They are also obliged to include a reconciliation between AISC and IFRS profits which are regulated , so without going into endless explanation , it is possible to make due comparisons
I will stick to my views re Endeavour and Cey, and others do likewise ..please note though ..it's Cey I am invested in and not Endeavour
Regards
yes Mr T Endeavour doesn't have a great history but is improving, share price flat on the year, Centamin has a great history fo churning out cash as you say but is getting worse hence down 25% on a year so Endeavour has well outperformed Centamin this year, lets see next. You are right that aisc is not a perfect metric and doesn't include all costs, however if a mine sells metal for less that the total cost, in the end it has to close just as Hochschild had to mothball Arcata, cash is king and sorry to go on but I think the key for Cey is to get costs back down so it starts throwing off lots of cash as it used to - though of course it used to be easier before the full 50/50 profit share kicked in.
Agreed Sotolo. Of course the biggest determinant of AISC is volume...AISC per ounce decreases as production increases , until full capacity is reached , so if Centamin was able to produce 500 + thousand ounces per annum , instead of 400,000 ounces, then Centamin would have a lower AISC and would be more competitive than Endeavour . It's that simple .
This is also why the life of mine update is so important .. worse case scenario being that the life of mine is going to extend from 10 years to 12 by decreasing annual production from 500,000 ounces to 400,000 ounces (but not stated as bluntly.)
Based on what the mining experts on the site are saying, this is unlikely to be the case..fingers crossed they are proved right .
companies also abuse AISC as it allows management to hide incompetence.
https://www.kitco.com/ind/fulp/2015-02-04-The-Real-Cost-of-Mining-Gold.htmled in an article in kitco.com “The Real Cost of Mining”: