Selling Gold Mine Production

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KenL

Member
Joined
Apr 7, 2018
Messages
5
Dear Members:

We are opening a small gold mine in Peru with expected annual production of 500 - 700 kg. We have been approached by representatives of major refineries in Lima to take our Dore production at 3 % discount to Spot prices. My questions, since this is small production, can we get a better deal if we refine our Dore at Canadian Mint and then sell it to wholesale jewelry companies.

Thank you for your feedback and advice.

Ken
 
Too many variables. Are they only paying for gold? Have you had several samples XRF'd? What would your inhouse refining costs be? Do you have the equipment in place to refine that quantity, and if not, would it be cost effective to do that?
Way too many variables. Are you willing to take the risk of sending your dore bars to a refinery? I am one that has a hard time trusting anyone to toll refine my material, so I am bias.
 
Use 3% as your opening figure for running the mine. It's a good costing number for projections.

Take your first production runs, see the full results, get to producing anything like 500Kg-700Kg per year and THEN worry about whether you can save a percent or not.

You're also going to need to see a full charging structure, along with all the other paperwork/restrictions/caveats you'll have when opening a mine there.
 
Thank you very much for your feedback. In our production, we only produce a Dore with about 88% gold content and maybe 2% Silver. We do not have the ability to refine it. However, Canadian Mint is a government refinery and very reputable, so I am sure I would get a good refining service from them. However, they do not buy gold, so I will end up with LBMA certified gold bars which I would like to sell to wholesale jewelry companies. I am hoping to get a premium if I sell to them rather than selling to refineries. The ones we were approached were Valcambri (Swiss) and Kaloti (UAE).
 
There are no special taxes between Peru and Canada and there is a tax treaty to avoid income tax payment duplication
 
Does any one has an idea the price which wholesale jewelers or electronics manufacturers pay to refineries for gold bars for their own consumption. How much premium over the Spot prices?
 
I think your biggest problem will be providing credit to the purchasers of your gold which is how most bullion dealers make their profit and taking say a middle view of annual production you will need to sell 50 kilos or $20 million per month, a big financial risk if your purchasers do not pay on time or at all , you are going to need very deep pockets unless you have very big margins from the mining operation and if you have big margins why risk it for the small extra margin you could possibly make. If you sold directly to Johnson Matthey or Metalor or any other large refinery you would lose around 1% of the gold value but would be paid on agreed turn around times, if you sold after having it refined which will still cost around 1% and were paid as soon as you found a buyer you might make between 1/4- 1% over spot, this end of the business margins are small but numbers are big so unless you have a good knowledge of how the market works I’d advise you to simple known methods to sell safely.
 
KenL said:
Thank you very much for your feedback. It was very valuable and direct to the point.
Click to expand...

You're running before you can walk. Get it up an running and then start worrying over a few percentage points.
 
KenL said:
Dear Members:

We are opening a small gold mine in Peru with expected annual production of 500 - 700 kg. We have been approached by representatives of major refineries in Lima to take our Dore production at 3 % discount to Spot prices. My questions, since this is small production, can we get a better deal if we refine our Dore at Canadian Mint and then sell it to wholesale jewelry companies.

Thank you for your feedback and advice.

Ken
Click to expand...
Were you able to get your mine up and running in Peru
 

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