Study shows actual gold cash costs are 50% more than what is reported

The Australian (paywall) reports the actual cost of mining gold is over 50% higher than the cash costs gold producers disclose in financial statements.

Analyst Stephen Thomas of Bell Potter, an Australian brokerage, found that "the average total production cost was $1,170 an ounce, compared with an average reported cash cost of $773 an ounce."

These figures are in line with new reporting standards announced by Goldcorp (NYSE:GG) earlier in January.

The company, the world's second largest gold miner, will be using a an "all-in sustaining cash cost" measure to more fully define the total costs associated with producing gold.

Goldcorp said the ". . . measure seeks to reflect the full cost of gold production from current operations."

Examples of all-in sustaining cash costs would include by-product cash costs, sustaining capital, exploration expense, and administrative expense. New project capital will not be included in the calculation.

For example Goldcorp's 2013 cash costs are forecast at $525 to $575 per ounce, but the all-in sustaining cash costs are $1,000 to $1,100.

The World Gold Council has been lobbying for the change, which it believes will give a better window into a company's profitability. It hopes the accounting changes becomes an industry standard.