How Much Does it Cost to Produce an Ounce of Gold?

Our planet’s gold reserves are limited, which is part of what makes the yellow metal such a valuable resource. This means that finding and mining gold can be a very costly endeavor. But just how much does it cost to produce an ounce of gold? It’s very difficult to determine exact numbers, but mining companies have methods of estimating production costs.

Mining costs were grossly underestimated up through the 1990s. Companies would report “cash costs” on their financial statements, which measure the costs specifically tied to extracting gold from the ground. These costs ran from $500 to $800 per ounce, depending on the location of the mine. But these cash costs failed to consider the expense of running a company, buying and repairing equipment, adhering to compliance regulations, and such.

A new metric has since been developed by the World Gold Council to report the “all-in sustaining costs” of mining gold. These numbers report that the cost of extracting an ounce of gold is actually over $1,000 per ounce, well above the aforementioned numbers. And since gold is currently trading at just over $1,200 per ounce, it explains why mining companies have had less-than-stellar profits.

Determining the costs of mining largely depend on the region as well. The cost differentiation depends on a variety of factors, such as the type of mine, the area’s regulations, the security of the area, taxation, legal hurdles, etc.

Generally speaking, one must consider each stage of the mining process when determining overall costs.

• First, gold deposits are discovered, explored, and found to be mineable.
• More intensive studies of the terrain take place, such as geochemical analysis and exploratory drilling. This may require an exploration license from local authorities.
• Once the size and location of the gold reserve has been estimated, the mining company must ensure it meets environmental and other regulations before pressing forward.
• The mining company must establish the site, which may include clearing the area, constructing roads and buildings, and bringing in mining equipment.
• Gold ore can then be physically extracted from the ground.
• Once the mine is tapped out, the mining company may be required (depending on the location) to restore and rehabilitate the site to pre-mining conditions, within reason.
• Mining companies may be required to monitor the ecology of the site after restoration.
• After authorities determine that the site has been successfully returned to a natural state, the mining company may relinquish its lease, and therefore its liability, for the area.

As you can see, the cost of mining gold goes well beyond the act of pulling the metal from the ground. Fortunately, more than one-third of gold is recycled from old jewelry, electronics, dentistry, etc. This means that not all consumables made with gold must rely solely on gold that has been freshly sourced from the ground. Relying more on recycling as a continuous source of gold may prove beneficial as gold reserves in the ground dwindle.

Much of the gold found on earth was mined and prospected many years ago. The process of finding and mining new sources of gold is a challenging endeavor. Our mining techniques have grown more sophisticated in modern times, but we can still only mine what is available. And the more scarce gold becomes, the more likely we are to see prices increase.

Since Australia has some of the world’s richest natural gold deposits, perhaps you might be interested in the 2017 1 oz Gold Australian Kangaroo, which also comes in several fractional weights to meet your budgetary needs.

Buying gold is only a few clicks away, but learning about acquiring gold as a raw material is fascinating. What interests you about the process? We may just write about it next!