Rising Mining Capital Costs Outstripping Gold Price Hikes, Labyrinth Resources CEO Says

Gold Investing

“Currently the increasing costs and the well-documented inflationary pressures on economies around the world … are still well outstripping the increase in the price of gold,” Labyrinth Resources CEO Matt Nixon said.

Despite the recent strong gold price performance, rising mining costs and the effects of inflation are impacting production and supply of the precious metal, according to Labyrinth Resources (ASX:LRL) CEO Matt Nixon.

“As it's been well documented, particularly in the last six to eight weeks, both in US dollar terms, (and) Canadian and Aussie dollar (terms), gold prices are touching all-time highs,” Nixon said.

“The really interesting point … is that currently the increasing costs and the well-documented inflationary pressures on economies around the world — those increases in real mining costs on a per-tonne or per-ounce basis are still well outstripping the increase in the price of gold," he continued. "So while it's great sentiment and lifts in the price of gold, operating companies continue to deal with real increases in their costs.”

Gold has been hovering around US$2,000 per ounce or above since April, and some analysts have predicted the price could go as high as US$2,600. Demand is also on the uptick, with the World Gold Council stating that demand for gold in 2022 was up 18 percent over 2021, according to Nixon.

“With the higher cost pressures, you're actually seeing a reduction in supply. … We haven't seen significant ramp up because of the capital associated, particularly with new projects coming online,” he explained. "If anything, we've seen the opposite, where the cost pressures are forcing mines to halt or (go) into care and maintenance for a period of time. Some quite large-scale operations have, unfortunately, gone that way in the last six months."

Watch the full interview with Labyrinth Resources CEO Matt Nixon above.

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