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Grade-cost relationships within Australian underground gold mines – A 2014–2017 empirical study and potential value implications

Steffen Hagemann, Sam Ulrich, Allan Trench

Quantitative analysis of publicly reported quarterly cost data from 23 Australian underground gold mines in the period 2014–2017 identifies consistent, statistically significant, relationships between gold grade and costs at the individual mines. Higher gold grades are associated with lower production costs throughout the dataset. The resultant regression lines for individual mines in their simplest mathematical form are a power function (f(x)=axb), where a is the scaling factor and b the rate of growth or decay in the grade-cost relationship. The general formula for the relationship between average feed grade and All-in Sustaining Costs (AISC) on a mine-by- mine basis is: