More matter with less art

Regarding cash costs per ounce

Once again, the subject of cash cost per ounce of silver came up at the Fortuna Silver (FVI.to) (FSM) conference call (just finished) and once again, it’s clear that when companies such as FVI have significant revenue coming from metals that aren’t in their corporate titles, it’s a tough thing to nail down. The problem with using cash costs per ounce with by-product deductions isn’t in the specific quarter in question, but rather the difficulty in using the metric as a decent and reliable baseline for quarter-on-quarter comparatives. The nature of silver mining is that few companies out there are “pure silver” plays, for the simple reason that other metals are found in the rocks that contain silver (Zn and Pb most typical, Cu and Au as well).
You can get yourself tied up in knots if you want to gauge costs using cash cost per ounce (which is partly why it’s never going to be GAAP acceptable). So yet again, your author proposes you cut the crap about cash cost per ounce with by-product deductions for mining companies such as FVI with polymetallic revenue streams (FVI gets moolah from four metals and previously from five) and simplify your life no end by doing this:

1) Look at Net Smelter Return per tonne
2) Look at Cash Cost per tonne
3) Subtract one from the other
4) The end

A much better way of handling these companies. After all, it’s margin that’s king in a profitable mining operation, not anything else. 

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