The Australian Gold Sector in Brief
UPDATE Jan 2012
Total number of ASX listed companies in the gold sector: 250
20% are producers, 20% developers, and 60% are explorers.
Australian Gold Producers (Jan 2011)
There are 46 producers of gold on the Australian ASX
Average TCO (total cost of operation per oz): $950 / oz
Average Current Cash Cost: $800/oz (varies from $150 - $1500)
Average EV per resource Oz: $120 /oz
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Australian Gold Developers (Jan 2012)
There are 45 "developers" on the ASX building a gold mine, but not in production.
The EV per resource Oz varies from $3/oz up to $1150/oz
The average EV is $92/oz
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Australian Gold Explorers (Jan 2012)
There are 159 explorers on the ASX who are of interest to a gold investor, about half do not have any published resource figures. Of all the explorers, about 10 have a negative EV as of Jan 2012.
There are 82 explorers with a resource
Market Cap/Resource Oz Range is : $2 - $4300/oz
Average market Cap cost per oz: $190/oz
Average EV cost per resource oz : $150 /oz
otal Stock...
Updated 13 Jan 2012
Background: What's the cost of underground gold on the ASX?
On the ASX, investors can purchase rights to underground gold through shares. To estimate the cost of owning gold this way, we use the market cap (or EV) divided by the total resource ounces. There is a big range in the cost-per-ounce of ASX stocks and it has the hallmarks of random distribution (see the graph below from 2009). Gold in large deposits is usually cheaper to mine per ounce than gold in smaller deposits. We'd expect the market to put a higher value on big deposits on average, and the blue line, below, would start high on the left and fall with the size of the resource. This would reflect the large economies of scale for digging and processing large deposits. Clearly, this is not the case. ASX investors do not appear to be considering the insitu value of underground gold. There are big cheap deposits out there.
Note: These are costs of owning the rights to underground gold, not cash costs of production which are usually around $500 - $1000 /oz. for a reasonably large producer.
The graph is based on Sept 2009 figures. You can see that a common value for underground resources in companies with significant resources is around $50/oz, but there are a lot of companies with very low valuations of their in situ resource.
If you are in the media or mine management and would like a more up to date graph ask here.
Be aware, the cheapest gold is not always the best value. It may be cheap for a good reason. Big deposits of gold are not so valuable if they are, for example: 2km underground; a refractory type mineralisation; 0.3g per ton, and 1000km from the nearest plant. Sometimes though, it's cheap because the market hasn't noticed it, or is ignoring the value of the underground gold.
Below is the full range of costs of ownership rights to underground gold across all companies in our spreadsheet. Outliers on the expensive end could be mining some other commodity, so they are an expensive gold play, but their real value may lie elsewhere. Having said that, there are companies predominantly in gold, whose underground gold has been valued in the $2000-$5000/oz range. Obviously the market is expecting a large upgrade in resources and has priced in these future discoveries already.
..........Minimum cost of underground gold: $-127/oz* (Jan 2012)
(*Yes, at the time in 2012 there was one company who had far more liquid assets than their market cap "a negative EV". This appealing situation for investors is not wildly unusual (though it's not normally so negative). The Pro sheet provides the details).
*This doesn't necessarily include every ASX company with a gold resource. Some companies like BHP have significant resources, but gold is such a small part of their total business they are not interesting to a "purely gold" motivated investor. We rarely include companies whose income is less than 10% gold based. As well as the companies above $10m market cap, we include about 90 companies who have less than $10m market cap.
Historical Sector Stats (2009)
In 2009 the total number of companies predominantly IN gold on the ASX (above $10m Market cap): 131*
This was made up of:
.......... 25% Producers (includes producers who are also developing or exploring)
...........25% Developers
.......... 50% Explorers
About two thirds of all the GoldNerds companies (190) were focussed on Australian mines or tenements, while about one third were working overseas, with or without an Australian property (103).
As expected, underground gold in the hands of producers was more expensive than deposits in companies at the 'exploration stage'.
..........The median cost for underground gold in producers: $100/oz (range of $13/oz to $1,800/oz)
..........The median cost for underground gold in explorers: $45/oz
(These are $EV1/oz figures, valid for Sept 21, 2009)
How big was that resource? (2009)
..........Companies with a JORC resource over 10 Moz: 12
..........Companies with a JORC resource over 1 Moz: 68
..........Companies with a JORC resource: 205
..........Companies with a JORC reserve over 1 Moz: 21
How pure was that gold investment?
The ASX gold sector is very diverse, only about a third of all the stocks were purely a gold or silver play. Another third were working with a mix of commodities where gold is dominant, and in the last third, gold is not the dominant commodity among the mix. So it’s more common than not for a gold stock to be exposed to other metal prices.
1: ‘EV’ is a recognised financial measure, short for Enterprise Value. It is calculated: EV = market cap – cash + debt. It’s what you’d end up spending (in theory) to own the company and settle its books. EV is more accurate than Market Cap. Often the two figures are similar.
Updated: Sept 20, 2009
From Oct 2007 Historical sector comparisons
The graph is based on Oct 2007 figures.