At the end of September, Citigroup put out a research report for the gold and silver mining sector, and if you're an investor in the space it does not make for good reading. The report concentrates on the rising costs but falling revenues of the mining industry and sets out how this is going to/has already affected many gold miners. We all have our own opinions, that's what makes us Foolish; nonetheless it is helpful to know what the big players in the industry think about certain matters, and information within this report could be helpful.
The report uses a current spot gold price of $1,320/oz throughout, so that is the figure I'm referring to when I use the term "at current prices."
The most shocking and surprising element of the report states that at current spot prices ($1,320/oz) up to 98% of gold companies are cash-flow negative, a staggering percentage of the industry. What's more, while the price of gold has fallen around 20% during the period June 2012 to June 2013, the average cash cost per ounce of gold production around the world has risen 11.8%, from $675/oz to $754/oz.
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