Inflation is eating miners' margins, but there is a saving grace

Margin compression has been ratcheting up over several quarters, said Exploration Insights author Joe Mazumdar. On Tuesday Mazumdar and analyst Brent Cook sat with Kitco. "Almost every cost center had gone up whether it's consumables, labor or energy. It's flat across the board. We're talking anywhere from 30% to 50%. And when you look at capital costs, we're seeing the [mines] that are getting into the news the most are the marginal-grade, large, milling, open pit operations," said Mazumdar, citing Cote and Magino projects. In December Argonaut Gold announced a 56% jump in capital costs for its wholly-owned Magino project in Ontario, Canada. In May IAMGOLD said its Cote development project was challenged and withdrew cost guidance. "Some of its scoping, but a lot is cost inflation. They're getting squeezed, but a lot of those precious metal companies are...balance-sheet-wise, in a much better spot than they were at the tail end of the last cycle."