Gold AISC: test grade, recovery and sustaining spend
A lower gold all-in sustaining cost can result from more ounces in the denominator, a different ore grade or delayed sustaining work. Reconstruct physical production and inspect cost classifications before concluding that the mine’s underlying economics improved. AISC alone is not an all-purpose measure of profitability.
Establish the guidance boundary
The World Gold Council publishes guidance for AISC and all-in costs as non-GAAP metrics intended to improve cost transparency. The guidance does not make every issuer’s presentation identical. Inspect the actual reconciliation, by-product treatment and whether the denominator is ounces sold rather than produced.
Keep cash operating cost, sustaining expenditure, growth projects and financing or tax items separate. Do not call a margin between gold price and AISC net profit. The company can have other cash needs, and production or sales timing can differ across the numerator and denominator.
Hypothetical grade-and-recovery calculation
Assume a mine processes one million tonnes at a grade of 2 grams per tonne and recovers 90% of the gold. Recovered metal is 1.8 million grams, or approximately 57,871 troy ounces using 31.1035 grams per troy ounce. These are illustrative engineering inputs, not a reserve estimate.
In a second period, throughput remains one million tonnes, grade falls to 1.6 grams and recovery to 88%. Recovered metal becomes 1.408 million grams, approximately 45,268 ounces. The mine produces fewer ounces without a change in processed tonnage.
| Mine worksheet | First period | Second period |
|---|---|---|
| Ore processed, tonnes | 1,000,000 | 1,000,000 |
| Grade, grams/tonne | 2.0 | 1.6 |
| Recovery | 90% | 88% |
| Recovered ounces, approximate | 57,871 | 45,268 |
| Illustrative cost numerator | 60 million | 60 million |
| Cost per recovered ounce | 1,037 | 1,325 |
The last row is deliberately called cost per recovered ounce, not reported AISC. To calculate the issuer’s AISC, use its specified cost categories and sales denominator. The example isolates how physical output can change a unit-cost result while total expenditure stays constant.
Investigate the mine plan
A temporary high-grade zone can lower unit costs without improving the entire ore body’s quality. Record planned mining sequence, stripping activity, stockpile use and sustaining projects where disclosed. Compare observed grade with the plan rather than treating every decline as an unanticipated failure.
Similarly, better recovery can come from a different ore blend instead of an enduring process improvement. Ask whether metallurgical characteristics changed and whether recoveries are measured consistently. Public disclosure may not allow the researcher to separate every effect; a range is more honest than an invented exact allocation.
Check spending and sale timing
If sustaining expenditure falls sharply, locate the actual projects and completion dates. Deferred work can improve this period’s metric while moving a cash requirement into the next period. A management classification as growth capital should be evaluated against project purpose, not accepted as proof that existing production needs no investment.
Reconcile produced ounces, inventory changes and sold ounces. Selling inventory can enlarge a sales denominator without an equivalent increase in mine production. Retain both physical series and explain why they differ. The final note should identify the contribution from grade, recovery, spending classification and sales timing before making any operating-quality claim.
This method cannot validate reserves, environmental obligations or future gold prices. It provides a repeatable way to test an observed cost movement using disclosed evidence rather than a single headline ratio.
FAQ
Is AISC the same as total company cash cost?
No. Read the reconciliation and excluded items. Taxes, financing and growth activity can create additional cash requirements.
Does a higher grade always mean sustainable improvement?
No. It can reflect the scheduled mining sequence or stockpile blend. Compare with the plan and the available geological evidence.