The World Gold Council (WGC) has published a Guidance Note on “all-in sustaining costs” and “all-in costs” metrics that gold mining companies can use in reporting their costs. WGC worked with its member companies to develop these non-GAAP reporting measures to provide further transparency into the costs associated with producing gold. 

The WGC Guidance Note defines “all-in sustaining costs” as an extension of existing “cash cost” metrics, which incorporate costs related to sustaining production. Its “all-in costs” include additional costs that reflect the varying costs of producing gold over the life-cycle of a mine. 

An “adjusted operating costs” sub-total of “all-in sustaining costs,” reported in US$/gold oz sold, includes: on-site mining costs (on a sales basis); on-site general and administrative costs; royalties and production taxes; realized gains/losses on hedges due to operating costs; community costs related to current operations; permitting costs related to current operations; third-party smelting, refining, and transport costs; site-based non-cash remuneration; stock-piles and/or product inventory write down; operational stripping costs; and by-product credits.

Additional elements of “all-in sustaining costs” include: corporate general and administrative costs, including share-based remuneration; reclamation and remediation of operating sites, including accretion and amortization; sustaining exploration and study costs; sustaining capital exploration; sustaining capitalized stripping and underground mine development; and sustaining capital expenditure.

All of the elements in the previous two paragraphs are totaled to arrive at “all-in sustaining costs.”

“All-in costs” include these “all in sustaining costs” plus: community costs not related to current operations; permitting costs not related to current operations; reclamation and remediation costs not related to current operations; and non-sustaining exploration and study costs, capital exploration, capitalized stripping and underground mine development, and capital expenditure.

The Guidance Note includes additional suggestions for defining the individual elements of these costs. WGC leaves it to individual companies to determine how they report these costs and to decide whether their stakeholders will find these new metrics of value in understanding their businesses. Since many companies report on a calendar year basis, WGC suggests that they may choose to use these metrics from January 1, 2014.

Terry Heymann, WGC Director-Responsible Gold, said, “These new metrics have been developed to help provide greater clarity and improve investor understanding. All companies involved in gold-mining, including those that are not members of the World Gold Council, will be free to use these metrics. Individual companies have responsibility for their own reporting, but we expect that many will use these new metrics, providing further consistency for investors and other stakeholders.”