Newmont CEO: Mining Profits Lower Than People Think

August 8th, 2014 by

empty-gold-mine-cartSpeaking to the Sydney Morning Herald about a possible increase in in royalty rates by the Australian government, CEO of Newmont Mining Gary Goldberg says that the profit margins of mining companies are much lower than people (or governments) think.

“Partly, this is our own fault.” he said, referring to the industry practice of excluding some expenses when calculating costs, in order to make their companies look more attractive to investors. The old method did not count corporate, capital, or financing costs when calculating the cost per-ton of mining production.

This became a serious problem in 2013, when the gold market saw a large 28% correction. Suddenly, the price of gold was near, and in some cases below, the actual cost of production. This led to the implementation of “all-in” expense calculations.

Governments from Africa to Oceania have been agitating for a bigger share of mining revenues, operating under the old assumptions that the mining companies themselves encouraged.