AISC All In Sustaining Cost
in Gold Mining Explained

This number is always on page one of the research report. Sell-side analysts use it as a core input in their valuation models. CEOs spend twenty minutes on it during earnings calls. Yet the vast majority of articles about AISC stop at "it is the total cost of sustaining one ounce of gold production," lay out a formula, and call it done. Making investment decisions with that level of understanding is basically using a ruler with no markings to measure things.

Barrick Gold and Newmont both report AISC of $1,050 per ounce. One might be mortgaging the next five years of its mine's grade profile. The other might be laying the groundwork for the next decade of production. Same number, entirely different meaning. The problem is not that AISC is a bad metric. The problem is that most people use it too crudely.

The World Gold Council published the AISC guidance framework in June 2013. Before that, the industry standard was Cash Cost, which only covered the narrowest layer of direct expenses: mining, crushing, leaching, smelting.

The problem with Cash Cost, in one sentence: a mining company could report low Cash Cost while burning through billions of shareholder dollars.

2012 was the watershed. Kinross Gold took a write-down of over $3 billion on the Tasiast mine, and Kinross's prior Cash Cost data had given absolutely no warning. The Tasiast project, from acquisition through expansion, saw its capital budget inflate continuously. Management, buoyed by optimism during high gold prices, approved a series of expenditures later proven to be entirely uneconomic. None of that money fell within the scope of Cash Cost. In June 2013, Newcrest Mining's write-down of over A$6 billion pushed the entire industry's cost disclosure problem onto the table. Newcrest's Cash Cost data before the write-down looked unremarkable.

These two write-downs were not isolated. Gold prices crashed from near $1,900 to the $1,200 range between 2011 and 2013, detonating a cluster of capital allocation disasters accumulated during the 2009-to-2012 bull run. What were mining company executives doing during those years? Acquiring aggressively, approving high-risk projects, inflating corporate scale. Barrick's Pascua-Lama project is the specimen of that era: a gold mine at 5,000 meters elevation on the Chile-Argentina border, with an initial capital budget of under $3 billion that kept climbing as environmental lawsuits, engineering difficulties, and design changes piled up, ultimately shelved indefinitely. This money did not affect Cash Cost. Not a single dollar of it.

AISC was introduced against this backdrop. It was not an academic product. It was the industry's collective reckoning, after a round of capital destruction, with a simple question: what counts as cost.

AISC adds layers on top of Cash Cost.

Mine Site Operating Cost is the base layer: mining, processing, site administration. The direct cost of turning ore into gold bars. On top of that, Sustaining Capital Expenditure: equipment replacement, tailings dam maintenance, underground ground support. Without spending this money the mine cannot maintain its current production rate. This inclusion is the most essential improvement AISC made over Cash Cost. Then Corporate G&A, head office overhead. Then exploration and study costs attributable to existing operating mines. Note the qualifier, "existing mines." The cost of searching for a new deposit elsewhere is excluded. Then reclamation and remediation accretion, then royalties and production taxes.

The inclusion of sustaining capital expenditure is the key improvement. In the Cash Cost era this was entirely missing, equivalent to a landlord counting only property management fees and not roof repairs, then declaring all rental income to be profit.

AISC is not a GAAP or IFRS standard. It is a Non-GAAP measure. What the World Gold Council published is guidance, not a mandatory rule. Every company has discretion.

What counts as sustaining capital expenditure and what counts as growth capital expenditure is the softest bone in the entire AISC framework.

A company discovers a new ore body at depth within an existing mine, commits $200 million to develop a new underground mining level. Sustaining the mine's long-term output? Or expanding capacity? Classify it as growth, it stays out of AISC. Classify it as sustaining, AISC steps up a level. Both arguments hold. Gold Fields' South Deep has been a point of contention on this issue for years. That mine was perpetually caught between developmental construction and production ramp-up, and the boundary between sustaining and growth was never clear. Different analysts' adjusted AISC estimates for South Deep could diverge by $100 to $200 per ounce. Same mine, same year of data, entirely different conclusions because of different views on capital expenditure classification.

This is the weightiest piece in AISC analysis.

What high-grading means: deliberately mining the highest-grade portions of the ore body first, leaving low-grade areas behind or skipping them. The immediate effect is straightforward. Each tonne of ore yields more gold, the cost per ounce drops, AISC looks good. The price is that the richest part of the mine gets eaten first. The remaining ore body's average grade degrades systematically. And many low-grade zones, once skipped, can never be economically mined due to the irreversibility of geological structure and mining sequence. Permanent reserve loss.

Mark Bristow's stance on this issue is the most explicit in the entire industry. During his time running Randgold Resources, Bristow treated mining in accordance with the mine plan's grade sequence as an inviolable rule, forbidding operating teams from cherry-picking high-grade zones to polish quarterly numbers. After Randgold merged with Barrick and Bristow took over, this discipline carried across. At investor meetings Bristow expressed something to the effect of: stealing future grade to dress up today's financial statements only postpones a bigger problem. He said it with conviction, because he believed the practice was a form of disrespect to the mine itself, capable of turning a twenty-year mine into a fifteen-year mine where every single one of those remaining fifteen years is harder than the original plan.

This philosophy had observable effects on grade management at several African mines after Bristow took charge of Barrick. The relationship between head grade and reserve grade at Loulo-Gounkoto shifted after Bristow's arrival, and the AISC trajectory in subsequent quarters reflected more disciplined grade management.

There is something here that does not show up easily on financial statements: the cosmetic effect of high-grading on AISC and the damage it does to mine value are severely misaligned in time. The cosmetic effect is immediate, visible within one or two quarters. The damage is lagged, potentially not appearing in AISC for two to three years and not fully exposed in reserve reports for five to six years. That time gap is long enough for one generation of management to enjoy beautiful numbers and depart before the problems surface.

Identification: pull the time series of head grade and reserve grade and compare them. If head grade exceeds reserve average grade by 10% to 15% or more for six consecutive quarters or longer, the mine is very likely being high-graded. If the average grade in annual reserve updates is declining persistently and the company has not reported new low-grade resource discoveries to explain the change, the signal is stronger.

Why spend so much space on high-grading in an article about AISC? Because a mine being high-graded produces the single most misleading AISC of any scenario: the number is in a beautiful downtrend, at exactly the moment the mine's long-term value is being hollowed out. If you cannot identify high-grading when looking at AISC, you are missing the most critical filter.

In the Proxy Statements of major gold mining companies, AISC targets are almost always among the performance metrics for management's short-term incentive compensation (STI). Barrick, Newmont, Agnico Eagle, Kinross, all of them. Weighting typically ranges from 15% to 30%.

This is connected to the high-grading problem. Management's annual bonus is directly tied to hitting AISC targets, creating an incentive structure that systematically points toward suppressing near-term AISC. Deferring a major equipment overhaul to the next quarter, reclassifying a capital expenditure item, processing a batch of stockpiled high-grade ore at quarter-end to pull down the quarterly AISC. All technically compliant. When you look at the specific AISC threshold values in the Proxy Statement alongside the year's actual AISC outcome, "just hitting the target" acquires an additional layer of meaning.

Agnico Eagle's record on this front is comparatively clean. The correspondence between their AISC and free cash flow is among the tightest of the large gold miners, and this is not coincidental. It relates to management's adherence to grade management discipline and consistency in capital expenditure classification. The company does not do the tricks described above, at least not based on externally observable data.

Gold is priced in U.S. dollars. Costs are paid in local currency. Fluctuations in the South African rand, Australian dollar, Canadian dollar, and Brazilian real directly alter the USD-denominated AISC.

During the sharp depreciation of the ruble against the dollar from 2014 to 2016, Polyus Gold's dollar AISC declined significantly, making it one of the lowest-cost large gold miners globally. The mine operations themselves did not undergo a commensurate efficiency improvement. The ruble did the heavy lifting. In the same period, Newcrest's cost trajectory in AUD terms and in USD terms were two completely different charts. AUD depreciation suppressed the dollar AISC, masking some underlying cost pressures on the operating side.

In some years, currency swings can move AISC by $50 to $100 per ounce. For a mine with AISC around $1,100, that is 5% to 9% of total cost. During earnings calls, management explaining AISC improvement by blending currency tailwinds with operational gains into one narrative is standard practice. Very few companies voluntarily decompose the two contributions, unless an analyst presses directly during Q&A.

In the AISC calculation, by-product sales revenue is deducted as a cost offset. Gold, silver, copper, zinc produced together; the money from selling the by-products is subtracted directly from costs.

The impact is limited for pure gold mines. For polymetallic mines it can be very large. Newmont's Boddington is a copper-gold mine with a meaningful copper revenue contribution. When copper prices rise, Boddington's AISC gets compressed. When copper prices fall, AISC bounces up. Nothing to do with mining efficiency.

The way to judge: compare the same mine's AISC with its Co-product Cost, the latter allocating total costs by each metal's revenue share without by-product deductions. If the gap exceeds $150 to $200 per ounce, the by-product distortion is high and the AISC's usefulness for assessing gold cost competitiveness needs to be heavily discounted. Some polymetallic mines show more AISC sensitivity to by-product price swings than to changes in operating efficiency. At that point the AISC has ceased to be a gold cost metric and is more like a composite reading of a multi-metal price basket.

This has a structural similarity to the currency issue discussed earlier: both are external variables that push AISC away from reflecting the mine's own operational efficiency. If a mine is simultaneously located in an emerging market currency zone and produces copper alongside gold, its dollar AISC is being pulled by both exchange rates and copper prices at the same time. Boddington is not in an emerging market so it only faces the copper factor. Some copper-gold mines in Africa face both factors stacked on top of each other, and the noise in their AISC is even greater.

How streaming works: the mining company sells the right to purchase a portion of future production to Franco-Nevada or Wheaton Precious Metals in exchange for upfront construction funding. After completion, the miner delivers agreed quantities of gold or silver at a fixed price of $300 to $500 per ounce, regardless of the market gold price.

The Wheaton-Vale deal on the Salobo copper-gold mine is a landmark case in the industry. The impact on AISC has two layers. The surface layer: streaming funds replace debt financing, lowering interest expenses. Interest expenses are already excluded from AISC, so this effect is indirect. The company's overall financial position is healthier, financial flexibility greater, enabling less stinginess on sustaining capital expenditure. The deeper layer is more subtle: the higher the gold price, the greater the value surrendered under the streaming agreement. At a gold price of $1,500 with a delivery price of $300, $1,200 is given up. At a gold price of $2,500, $2,200 is given up. The mine's AISC stays the same, but the economic value the company retains per ounce of production is shrinking. AISC cannot reflect this.

When analyzing a miner with significant streaming obligations, you need to determine what percentage of total production is encumbered, what the delivery price terms are, and how much economic value the company retains under different gold price scenarios. Some miners have over 30% of their gold equivalent production under streaming or royalty obligations. At that level of burden, the dilution to shareholder value in a rising gold price environment is continuously amplifying, yet the AISC numbers show nothing unusual.

Mines in West Africa and South America operating far from the national grid rely on diesel generator sets, with diesel trucked in over hundreds of kilometers of dirt roads. Power costs reach 15% to 25% of total operating costs. Every swing in international oil prices transmits in amplified form to these mines' AISC. Not just the diesel itself getting more expensive: the trucks carrying the diesel also burn diesel, so logistics costs rise in tandem. Positive feedback loop. IAMGOLD's Essakane in Burkina Faso has been dealing with this for a long time.

Some miners are building solar power stations at mine sites to hedge energy risk. An accounting detail that is easy to overlook: if the solar station construction costs are classified as growth capital expenditure, they stay out of AISC. Short-term AISC is unaffected or even declines as power costs gradually fall, producing a smooth-looking cost improvement trajectory. To distinguish between structural operational improvement and a capital expenditure classification effect, you need to read the capex breakdown. This is the same mechanism as the sustaining-versus-growth classification issue discussed earlier, manifesting in a different context.

An industry expression that will not appear in any financial report. Systematically cutting sustaining capital expenditure and underground development to make current-period AISC look good.

AngloGold Ashanti's Obuasi mine was placed on care and maintenance around 2014, with long-term underinvestment leading to underground infrastructure deterioration as one of the contributing factors. Restarting took years and significant capital. This and high-grading are logically the same type of problem: trading today's reported numbers for tomorrow's operating capability. Yet on the AISC report they look exactly alike. High-grading lowers AISC. Starving the mine also lowers AISC. One manipulates on the grade side, the other on the capital expenditure side. The two can even occur simultaneously at the same mine.

The lag effect is severe. After cutting underground development spending, a mine may run normally for two to three years with AISC improving year over year. By year four or five, insufficient stope availability causes production to fall off a cliff, AISC spikes, and the remediation takes another two to three years.

The name says "All-In." What gets excluded is not trivial.

Growth capital. The billions Barrick spent on Pascua-Lama do not affect AISC. A company with AISC of $950 that is simultaneously spending $1.5 billion building a new mine may have negative free cash flow. This is also why the divergence between AISC and free cash flow matters so much: the gap often contains exactly these types of large expenditures invisible to AISC. Kinross in 2012 to 2013 exhibited severe disconnection between AISC and cash flow, with the Tasiast expansion and other major projects consuming cash outside of AISC.

Interest expense. A highly leveraged miner and a debt-free miner can report the same AISC. In a rising interest rate environment the weight of this omission increases.

Income tax. The tax burden in Nevada and the tax burden in Burkina Faso are not the same thing. In parts of Africa and Latin America, mining tax regimes can change with little warning. In 2023 Burkina Faso's military government revised the government equity participation requirements in the mining code. IAMGOLD's Essakane, mentioned earlier in the context of power costs, sits in Burkina Faso. Power cost risk and tax regime risk stacked on the same mine, and AISC is blind to the latter.

Reserve replacement cost. Gold is a depleting resource. Every ounce produced is one fewer ounce underground. Sustaining a company's long-term survival requires discovering new reserves through exploration to replace what has been mined. AISC only includes exploration costs for "existing mines." The investment needed to discover an entirely new deposit is excluded. Globally, the number of large gold deposits discovered in the past decade has been declining, and the difficulty and cost of finding new ones are rising. AISC measures "the cost of sustaining current production." It does not measure "the cost of sustaining this company as a going concern." Agnico Eagle's exploration and development spending on Meliadine, Amaruq, Detour Lake, and other projects is core expenditure sustaining the company's long-term production curve, and a substantial portion of it falls outside AISC. If you include the full cost of reserve replacement, the industry's cost level is a notch higher than what AISC shows.

The World Gold Council simultaneously defined AIC (All-In Cost), which includes growth capital expenditure. AIC adoption in the industry is minimal because the volatility is too high. One big project can double the number, making quarter-over-quarter comparability awful. The more comprehensive metric has lower adoption. That paradox remains unresolved.

Tracking over time beats cross-company comparison. Two companies' AISC may be calculated under two different sets of classification rules. Tracking the same company's AISC trend over five or ten years for directional signals on operating efficiency is far more reliable. Agnico Eagle's AISC trajectory over the past decade matches the company's reputation for operational quality in the industry.

AISC Margin is more useful than AISC. AISC Margin is gold price minus AISC. A miner with $1,200 AISC at a $2,000 gold price has $800 margin. A miner with $900 AISC has $1,100 margin. The latter survives a gold price drop to $1,300. The former is already at breakeven.

The rate of change in AISC Margin is more interesting. Gold price goes from $1,800 to $2,000. A company with $1,100 AISC sees margin expand from $700 to $1,000, a 43% expansion. A company with $900 AISC sees margin go from $900 to $1,200, a 33% expansion. The former has greater profit leverage to a rising gold price. This is why high-AISC miners often outperform low-AISC miners in terms of share price gains during bull markets. The pattern was quite visible during the 2019 to 2020 gold price rally. Companies on the right side of the cost curve are leveraged bets on the gold price. Bristow, after taking over Barrick, discussed this logic on multiple occasions. He was facing a group of analysts questioning why Barrick was not shutting down high-cost mines. Bristow's view was that under an expectation of rising gold prices, the profit leverage of high-cost mines was precisely the greatest. Shutting them down was destroying option value.

Cross-check AISC against free cash flow. If AISC shows $500 profit per ounce, annual production of 500,000 ounces, there should be $250 million of profit margin. If free cash flow in the same period is only $80 million or even negative, the gap is costs that AISC does not capture eating into earnings. Kinross in 2012 to 2013 was in exactly this state. When this kind of persistent divergence between AISC-implied profit and free cash flow appears, going back to check the company's growth capital expenditure, interest payments, and streaming delivery obligations for the period usually explains it.

The deviation between head grade and reserve grade. The earlier discussion of high-grading covered this at length. The core data points are these two grades compared over time. A deviation of 10% or more sustained for over two years means future AISC will almost certainly rise, and the rate of increase will exceed what a linear extrapolation of grade decline would suggest. The nonlinear relationship is explained below.

Isolate the currency contribution. The Polyus and Newcrest examples above were specific enough.

Read the Proxy Statement. Note the AISC weighting and threshold values in STI.

AISC must be read alongside the gold price. An isolated number is meaningless. The industry divides cost competitiveness by quartiles: lowest quartile has strong counter-cyclical resilience, highest quartile is marginal producers who shut down first when gold drops.

Global inflation, rising energy prices, and labor shortages over the past decade have pushed the industry's median AISC significantly higher. $1,100 in 2024 versus $900 in 2016, after inflation adjustment the gap is smaller than the nominal figures suggest.

Geographic cost differences are frequently underestimated. An open-pit gold mine of the same grade and scale can have AISC differing by over 30% depending on whether it is in Australia, Canada, or West Africa. Not an operating efficiency difference. It is differences in labor costs, energy costs, infrastructure access, supply chain logistics, and regulatory compliance costs. B2Gold's mines in Mali and the Philippines are not comparable on the same basis. A mine deep in the Mauritanian desert with AISC of $1,050 may already be at peak efficiency. The same number at the Carlin Trend in Nevada may suggest room for improvement.

Putting this together with the currency issue discussed earlier: a mine located in an emerging market, off-grid, producing copper alongside gold, has its AISC simultaneously pulled by exchange rates, copper prices, and diesel prices. A mine in Ontario, Canada, connected to the grid, producing only gold, has AISC that mostly reflects the mine's own operating conditions. The signal-to-noise ratio of AISC in representing operational efficiency is not in the same league between these two types of mines. The latter's AISC changes can largely be attributed to what is happening at the mine itself. More than half of the former's AISC changes may have nothing to do with mine operations.

A gold mine's AISC over its entire production life traces a U-shaped curve.

During the early ramp-up phase, production has not yet reached design capacity while fixed costs are already being allocated. AISC is high. At steady-state production, the highest-grade ore is being mined. AISC reaches its lowest point. Then as the mine matures and enters decline, grade drops, mining depth increases, stripping ratio rises, maintenance costs grow. AISC climbs.

Newmont's Ahafo in Ghana roughly followed this curve. High in the early years, the cost sweet spot during peak production, then a gradual upward drift as the mine matured.

For multi-mine companies, the analysis requires placing each mine on its own life cycle position, then assessing the direction of company-level AISC over the next three to five years. A company with all aging mines likely faces accelerating AISC deterioration. A company with all newly commissioned mines may be about to enter a declining AISC phase. The healthiest portfolio is a mix of old and new, where grade decline at mature mines is offset by fresh production from new ones. Agnico Eagle achieved this through the sequential commissioning of Meliadine, Amaruq, Detour Lake, and other projects. The company's consolidated AISC stayed within a relatively stable band over these years, while each individual mine underneath was tracing its own U-shaped curve. This pipeline management capability is not common among large gold miners.

This connects to the reserve replacement cost issue. How much exploration and development spending does maintaining this pipeline require? That spending is outside AISC. A company with attractive AISC and a healthy pipeline may tell a completely different story once you add back the full cost of reserve replacement. Agnico Eagle's exploration spending as a percentage of revenue has consistently been among the highest of the large gold miners, and most of that money is outside AISC. Without spending it there is no Meliadine and no Amaruq. Without those new mines there is no long-term AISC stability. This is a logical loop that the AISC framework itself cannot close.

The relationship between grade and AISC is nonlinear. A 10% decline in grade typically produces more than a 10% increase in AISC. More ore must be mined and processed to obtain the same amount of gold, and the incremental ore brings not just a linear increase in processing costs but also rising tailings volumes, higher reagent consumption, accelerated equipment wear, and increasing energy use. A cascade of compounding effects.

This nonlinear effect, read together with high-grading, explains why the consequences of high-grading are so severe. High-grading accelerates the consumption of high-grade ore, pushing the remaining ore body into a lower grade range, and the nonlinear relationship between grade and AISC amplifies the cost consequences of that push. A mine that follows its original plan with even grade depletion from 4 g/t gradually down to 3 g/t will see AISC rise incrementally. A mine that, due to high-grading, sees grade jump from 4 g/t to 2.5 g/t within a few years will experience an AISC spike far exceeding what the proportional grade decline would suggest. Bristow's insistence on grade management discipline during the Randgold era was rooted in this nonlinear effect. He understood it earlier than most of his peers.

The work of mine geology teams on grade control and ore blending optimization, deciding each day which working faces feed the processing plant and in what mix, is one of the most fundamental variables shaping AISC's future direction. This work never appears in any investor-facing reported number, nor in any analyst valuation model, yet it is shaping the AISC number six months out, every single day.