Whats the cost of underground gold on the ASX?
The current A$ gold bullion price is around $1150/oz. 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). 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 $30
