This'll be sure to get the punters thinking....
In light of the rapidly rising costs mining companies are facing in Australia, particularly in the gold sector, in rampant diesel costs, steel costs and labour....is the future of this historic sector in jeopardy? Many economic feasibilty studies from as recently as 2006 are proving to be obsolete and out-of-date, and the increasingly tight credit market is forcing creditors and banks to implement tighter credit terms and conditions.
Costs per ounce are on the rise, we have seen a recent high-profile case where high operating costs and falling grades at Bronzewing have forced View Resources into voluntary administration. Other companies are also under considerable pressure, such as Monarch Gold whose current costs at Davyhurst are almost $1000/oz, and Barrick Gold whose Granny Smith's Mill was running close to $700/oz in the last quater of 2007. With so many companies operating under very tight and sensitive financial models, a sharp fall in the gold price could prove very costly.
Does the future for Australian gold companies lie in Africa? With the emergence of Ghana and Tanzania as potential premier gold producing countries in their own right, and the allure of an unending stream of cheap labour, which companies will be drawn to this exciting, but potentially volatile part of the world? With costs averaging around $350/oz in Tanzania, could you blame them?