Transcription
So earlier this week, I got two emails from a longtime podcast listener asking about all-in sustaining costs for primary gold and primary silver miners. And she was asking me if this relates to Marx's labor theory of value and my thoughts on this. And he sent me some long emails, so thanks for the emails. But rather than sending him back long email responses, I thought I would turn this into a podcast. And basically also a lecture with my more of my thoughts on the industry. I've held some of them back. I've tried to be polite about the industry. And with gold mining stocks becoming more popular lately, I think I should probably air some of my grievances out. Maybe it's not Festivus officially, but maybe I should air some of my grievances out and go on a rant.
So, the only if you're not familiar with the industry, the all-in sustaining cost metric, or AISC, is fairly new. It's only about five or six years old. Before that, the industry was really only reporting cash costs. So if you looked in investor presentations, if you looked in annual reports, if you looked in quarterly reports, maybe you would see occasionally something different in the management discussion and analysis paper that a company, that a mine company could put out quarterly. But it was really a crapshoot and the wild, wild west for guessing what the actual costs of a mining company were. There were tons of investment bank analysts in the US and Canadian investment bank mining analysts who would have estimates all over the board for the cost of gold and silver miners. The, the variances, what the costs were, crazy. It was the, the variances were just enormous. We were talking the, the different cost estimates and the earnings projections would be, there would be a 40% or more gap. And I'll talk about why.
So the industry, I've been in the industry now for, for ten years, either writing research reports or interviewing CEOs, talking with a lot of people, a lot of experts in the industry, learning the industry, looking at hundreds, many and many hundreds of investor presentations for mining companies per year in the past. I don't do it as much. So thousands of total investor presentations, looking through financial statements, look, reading through annual reports. Also, whenever there was conferences like the Denver Gold Forum or the European Gold Forum, I would watch a lot of the presentations. And people, some people who are really into mine stocks and asking me about individual mine stocks and they're like, "Jason, why don't you like this mine stock? Why don't you like mine stocks too much anymore?" And the answer to me, you can make a lot of money if you time the mining stock purchase right over a swing trade, holding it through certain parts of the cycle for a couple of years. But knowing what I know about the mining industry and how, with even with the all-in sustaining cost metric, that it still is not as accurate as it should be. And this is why I'm gonna do this, this podcast lecture.
The all-in sustaining cost metric, it is an enormous improvement from the cash cost metric. And I'll give you some examples. So I would attempt to reverse engineer the numbers of the mining company. So the mining company in the past, before all-in sustaining cost, and initially, all-in sustaining cost was not adopted by a lot of the mining companies. It took a couple of years, about two years, maybe three, for the mining companies to all start adopting it. And even now, there's one mining company like that, and I'll name it because I want them to improve, I want transparency. SSR Mining, that's what Silver Standard used to be. They bought two medium-sized producing gold mines. And I, about two months ago, I looked through their investor present. It was about two months ago, I looked through 40 pages of their investor presentation slide deck. I looked through their annual reports, I looked through their quarterly reports, and there was no mention whatsoever of their all-in sustaining cost metric. It was intentionally not mentioned. Their cash costs and lowered cash costs and their gold production was mentioned in their investor presentation six or seven times. No mention whatsoever, even in the footnotes, of their all-in sustaining cost. The only place that their all-in sustaining cost metric was mentioned was in their management discussion and analysis for Q1 of 2019, and it was buried in about one cent, since, unlike page seven or eight of a 30 or 40 page document. So the average retail investor, and many professional investors, are not going to do that type of work. Okay, the industry needs more transparency. It needs itemized costs listed for the real cost. But then the mining industry will have even more problems. Okay, the mining industry in the past, if the mining industry was honest about its cost, the mining industry, probably most of the companies would already be bankrupt. If they are honest, fully honest about their real costs, if they itemized all their costs, the industry, most of the miners would already have been bankrupt.
We are at a gold price now of $13.40 in US dollars, and that's about a $200, $250 an ounce, $200 an ounce margin for a lot of the primary gold miners. So that's pretty good. And that's why the gold miners are getting more capital, more money's going into now. We're at a silver price of $14.83 cents. That is not good. The marginal cost of production for silver is right around those levels. So the mining industry, primary gold, primary silver, until the all-in sustaining cost metric was adopted five or six years ago, the, when I would reverse engineer and run the numbers with the earnings announcements and the operating cash flow and try to backward reverse engineer what the real costs were, because the mining company would come out and say, "Our cash costs were $500 an ounce," right? And then you'd see, even with the gold price at $1,600, the mining company would bomb earnings. The earnings would be horrible. There would be little earnings or be a loss. And I would be like, "What the heck is going on here? This doesn't make any sense." And the estimates, the research reports for the Canadian investment bank analysts, they were over the map too. There was enormous variances.
So what I figured out by looking at all these different companies was these companies were basically legally allowed to get away with drastically under-reporting their real costs. And to a certain extent, and I've covered this in the last year too, I've done videos going through Barrick Gold's all-in sustaining costs and showing the discrepancies. Barrick Gold, I think a year ago, was claiming that their all-in sustaining costs were $700, high $700, mid $800 an ounce gold. And I showed you guys the audio. There was audio problems on the video. I have the audio to low, but I showed you the real numbers matching their financials. Their real all-in sustaining costs were really close to $1,100 an ounce, $11.50. Okay? So right now, they're still not, with all the primary gold miners and silver miners, but a good amount of them, there's still about a 20% to 30% discrepancy between their real costs and their all-in sustaining cost. So the all-in sustaining cost metric is a big, big improvement compared to how things used to be. But in the past, there was honestly, there was blatant fraud. There should have been hundreds, I'm not sure exactly how many lawsuits there were, but for a lot of these publicly traded gold, silver miners, there should have been hundreds upon hundreds of class-action lawsuits about the mining companies by bondholders, by equity shareholders, to management teams, accusing them of blatant fraud and lying about owns, about their real costs to raise capital. Okay? And the, in the past, the cash costs were so misreported that I would run the numbers on some of these mining companies and that the real, their real cost versus what they're reporting with their cash costs, that some of these companies were underestimating their costs as much as up to 70% or 75%. Okay? Now, that wasn't every company, but most of the mining companies in the past, when they only had to report cash costs, they were under-reporting their costs. The majority, got the majority of companies was under-reporting their costs by 40% to two-thirds. Drastic under-reporting of costs.
So, and some of these CEOs are still there. The Hecla CEO was still there. Hopefully, he won't be too much longer. Hopefully, he will be gone soon. Hopefully, if Hecla goes through pre-packaged bankruptcy, hopefully he will be gone. Okay? There should be to force more transparency, to force an itemized cost list, there should be shareholder lawsuits, bondholder lawsuits against management. We want an itemized, we want transparency in the industry. We want itemized cost lists. But then the management teams can't act like they're profitable. Then the management teams can't raise capital. Then the management teams can't pay themselves high salaries. Then the management teams can't collect options and bonuses and stay at the company. They would have been gone already. A lot of these miners would already been bankrupt.
And if you guys want to see how bad this is in another industry, I encourage you. It's on its under for our audiobook. It is called, it came out last year, it's called "Saudi America: The Truth About Fracking and How It's Changing the World" by Bethany McLean. And that's available on Audible audiobook. And the oil industry, which is much larger than gold mining, much larger than silver mining, is going through very similar problems right now to what the gold mining industry is. So these, the oil industry, especially the frackers, have been drastically lying about a lot of things. Blatant fraud. And there's tons and tons of shareholder lawsuits. It's talked about in the book. And David Einhorn and other short sellers, they went back and they compared investor presentations from these shale oil companies of their costs versus the financial statements and showed enormous discrepancies. On top of that, they also showed that the oil companies were, some of these oil companies were overstating their reserves tenfold. So in investor presentations, whether that was a slide deck, a PowerPoint that was officially endorsed by the company's corporate lawyers and management, and their annual reports, and all these reports that the company released on their website. And then when the company went to conferences with potential shareholders or investment bankers to raise capital, they would show a certain amount of set of slide deck presentations with their cost projections. But their SEC filings were enormous, enormously different than their real stuff. So David Einhorn and other, what's the right word, activist investors or short sellers, went back and they showed just enormous discrepancies. And a lot of these shale oil producers, some of these shale oil producers, not all of them, but some of them were overstating. They would say that maybe they had 50 million barrels of, excuse me, they would say that they had like 10 billion barrels of oil reserves right on their, on their investor presentations. And then in their SEC filings, because they were worried that the SEC would get them, they would really say that their official oil reserves were only 800 million barrels. So you have 800 million barrels reported to the SEC of reserves versus 10 billion. They were telling investors why? Because when they said they had 10 billion barrels of economic reserves, it was easier for them to raise shares, equity, easier for them to sell junk bonds to pension funds and private equity. Private equity didn't really care because private equity knew at least for years that they could flip that on to and dump it on to public markets, dump it to pension funds. So private equity didn't care if there was fraud or not, as long as they can make a profit. And the gold mining industry, and this is why I say that a lot of people in the gold industry are lazy or dishonest, because I've had situations where I've emailed Investor Relations, where I've spoken with management teams, and I've been lied to. And I've been lied to. And I saw this about 8 to 12 months ago. One of my longtime listeners forwarded me an email from the Investor Relations Department of a junior minor. And it was blatant lying, blatant fraud in the email. One of the claims was that this producing mining company was running out of reserves at their mine, when in fact, the mining company had just announced an extension of eight or eight to ten years on reserves at the mine. And so this was in the email, blatant lying, blatant fraud. Now, maybe they can say that this is their opinion. But buyer beware. And this is why it is dangerous to buy an individual mining company and hold it throughout the entire cycle. You can make a lot of money in an individual mining company if you time things right, if you buy the right one or two or something like that. Again, not financial advice. But the odds, if you hope, if you buy and hold and don't check it in your account and don't do the research and don't look at the chart, there's always the possibility with a producing mining company of a surprise capex thing coming. And the mining, normally the mining company is not going to be super, what's a super transparent about saying that, "Oh, by the way, we're not doing too all financially, and we have another $200 million in capex that we have to spend on this mine, or we're gonna lose a lot of money in the mine and be bankrupt in 12 months."
So the industry is improving. It has a long way to go. But when I got into the industry, I was very naive. And the gold price was also rising. So when the gold price, when I got in in the 2000s, I started read, didn't buy any mining stocks in 2007, '08. I started researching. But when there was blood in the streets, I started buying in late 2008, in 2009. But then the central banks intervened. The Fed did QE, and the gold price started to rocket higher. So when, when you have a high gold price and the gold price is going up, it's, it covers up a lot of mistakes. Okay? Because then it's easy for the mining company, even if they're lying about their cost, committing fraud, even if they're, even if they have enormous capex increases, they can raise capital. They can go to the market and they can raise more shares, or they can use debt. And that's another problem I have with a lot of these mining companies is how easily they decide that they just want to take on more debt. So some of these mining companies have like three to five different tranches of debt. They have like a revolving credit facility that they've topped. They have senior secured stuff. They have, you know, all these different tranches of credit. And that's very dangerous for a mining company because they don't know what the commodity price is going to be. They don't know what their revenues, they can't accurately project their revenues. And if you look at them, the predictions by CEOs of mining companies, the same thing goes for oil company CEOs, and they're in trouble with debt. To some of these guys, if they don't hedge the oil price, if the commodity price falls and the revenue falls a lot, they're stuck with an enormous amount of debt. And this is the situation you all with Hecla. You have a situation now where if the gold and silver prices had risen a lot, Hecla would be in much better shape. Now, gold has risen a little bit, but Hecla is already in big, big trouble. And once you breach your debt covenant, the bankers, then, if you're not familiar, the banker is what the, the investment bankers are probably going to force Hecla to do is they're going to be forced to draw up, this is just hypothetical, I don't know anything specifically about what's going on at Hecla that's not public record. And they may ask Hecla like, "Drop a list of assets that you think would get the most money." And the bankers may force Hecla to start selling these things at any price in the next couple months. This thing could happen.
So the gold and silver mining industry, there's three major problems. Like I said, to, to summarize things, if you don't want to gain anything else, and why it's dangerous to buy individual mining stocks. Number one, in the past, the gold mining industry, for a very long time, most of the miners were drastically under-reporting their costs by 40% to 65%, 66%. Okay? Some of them, there were extreme cases that were 70%, 75% under-reporting their costs. Now, with all-in sustaining costs, a lot of the miners are still under-reporting their costs by about 20% or 30%. So it is improved. It has to get better, though. Number two, you have unexpected bad capex surprises. Capital expenditure, capex surprises, where in order to maintain the mine, all of a sudden there's an extra, if it's a smaller mine, $50 million. If it's a medium-sized mine, $100 million to $200 million. If it's a larger mine, you're looking at $400 million to $800 million dollars, sometimes even more than that, of a surprise investment to lower the, to make the investment into the mine, to lower the cost further, or optimize the mine, or something at the mine broke. So individual mine stocks have enormous amounts of problems. And I've shown in the past that the all-in sustaining cost of a company that they put out in their investor document does not match their financial statements. And I've showed that with screenshots. I did that with three of the silver miners about a year ago, maybe 18 months ago. I did that with Barrick Gold, whereas like most of the Seeking Alpha article writers were talking about how Barrick Gold was the best investment, they had cut their costs down $800, their financial statements looked good. And then Barrick Gold went and did that dumb acquisition, the merger with Randgold Resources, and gave themselves even more operational problems. They were having problems at their mines already. I showed the discrepancy between Barrick Gold's all-in sustaining costs versus their, what their financial statements. And I backward reverse-engineered it, ran the numbers myself, and showed that Barrick Gold's real costs were around like $1,100 an ounce, not $800. Just because Hecla has had a, Hecla, maybe a trade. Hecla on the short term can go up. If I was the Hecla, this is hypothetical, if I was the Hecla mining CEO, I'd be diluting like crazy every time the stock price went up. So at some point, you're gonna see massive, massive dilution for $100 million, maybe even more. You're gonna see that with a lot of these miners because a lot of them have wanted to dilute and sell equity.
So I turn this into a little bit of a lecture. But the all-in sustaining, if you, if you're not familiar with all-in sustaining costs, and you don't subscribe to a paid newsletter that does it for you, and you don't read Canadian investment bank research on going through the balance sheet and costs and things like that, and you're buying an individual mine stock, you better have an exit plan. This is not financial advice. But you better have an exit plan in case something is screwed up, where a management loses control of the costs, or it's come out that they're drastically under-reporting the costs. So management says that the all-in sustaining cost is $900 an ounce, right? But then they have absolutely horrendous earnings. Because at $13.30 gold, or whatever we're at now, it's, I said earlier, $13.40 gold, right? If management has $900 or $1,000 an ounce all-in sustaining cost gold, they should have good margins. And then you see in the earnings report that it's the last couple quarters are bad. That would be red flags, unless management has a really good explanation for it.
So the, the oil industry right now is going through even worse than what the gold mining industry went through. And the oil industry is not changing, guys. The oil industry is still lying, despite hundreds of shareholder lawsuits. Guess what? There is no itemized costs listed for a lot of these oil companies. These oil companies are drastically under-reporting their costs. Okay? A lot of these US shale oil producers are saying that they can produce oil profitably at $20 to $30 a barrel. And yet, you look on their finding their income statement and their stamina cash flows, and you just don't see that. It does not reflect that. Okay? So these shale oil companies, they're going to the conferences for investment bankers and high net worth and hedge fund guys. And they are putting out presentations on their PowerPoint slide decks that, "Oh, we can, our costs are down enormously in the last five or six years. We can, we can produce oil for $20 or $30 a barrel." Well, where are your earnings? Why are you taking on more debt? Why are you selling more shares? So it doesn't jive. And they should be sued. They're only, first of all, they're only listing their lifting costs. So it might cost them $10 or $20 a barrel at the wellhead to get that oil out for lifting costs. But that's not counting transportation costs. That's not counting their cost of capital. That's not counting in their selling, general, and administrative expenses. When you add all those things in there, some of these oil companies are losing, shale oil companies are losing massive amounts of money. Their costs are way higher than the current market price. And the gold mining and silver mining industry was doing the same thing. So they have adopted, I like all-in sustaining costs a lot better than the past. There is a lot less of a guessing game. There is a lot less discrepancy and variances now between analyst estimates for earnings and and costs. So it is very frustrating to still see this going on. There has not been as many class-action lawsuits in the gold, silk, gold mining and silver mining industry as I thought there would be. But in general, it is a small industry compared to like oil and some of these other industries. And this is why I say that the gold mining CEOs are the worst. And then on top of that, the other examples are, there's been since 2010, there's been different estimates, but about $80 billion ran off in bad deals. A lot of the bad mergers and acquisitions were done at the top of the market. Barrick Gold even paid billions of dollars for a copper miner that was, I think, six or seven billion dollars. The whole thing was written off. So just an enormous amount of money that was written off at the top of the market. And on top of this, the miners, the share prices of the miners went up hundreds of percent, but their fundamentals, the operational business, their earnings, their free cash flow did not match what the gold price was. So when the gold price was going up to as high as $1,900 in September of 2011, you would think that the primary gold miners would have made fortunes mining gold. But guess what? Their costs rose. Actually, a lot of, not every miner, but a lot of the miners' costs rose faster than the metals prices. So their margins collapsed. So they were making money, but they were making nowhere near the amount of money that they should have. And this is poor management. So if the management wouldn't have tried to bring on more and more higher cost marginal gold mines with a higher gold price, if they would have been more careful about maintaining margins, realizing that maybe the gold price going up to $1900 wasn't as sustainable, if they wouldn't have tried to be as aggressive and do deals at the top of the market with debt and equity, then maybe things would have turned out better. So if the mining company would have just kept its low-cost, best margin mines online when gold price was gone in $1900, they could have generated a lot more free cash flow. Then they could have had cash in the bank when the bear market started. And then maybe they could have started doing some acquisitions. And the mining industry CEOs just don't know how to use debt properly. And I just interviewed Brent Johnson yesterday. And I'll have to do a little bit of editing before I release the interview either later today or tomorrow. She was talking about how basically most of these primary gold and primary silver miners would have went bankrupt already without debt. So in my opinion, they never should have used, they should have used almost very little debt in the first place. If they're gonna use debt, they need to focus in on making a strategic acquisition maybe for cash flow and then pay off the debt. But that's not what these mining companies are doing for the last 10 years. They've been doing it for longer than that, but it's just gotten worse in the last 10 years. Their debt to equity ratios, a lot of them are pretty horrible still.
So just because a miner right now says if their all-in sustaining cost is $1,000, you got to look at their financial statements to see if that matches. So if they're producing 500,000 ounces of gold and they have a thousand dollars on sustaining cost right now, they should have at least $300 per ounce in margin in free cash flow margin. Which means the math should be easy. It should be total number of gold ounces produced per year times at $300 per ounce cash flow margin, and that should be how much free cash flow they have. And if they don't have anywhere near that, then there is a red flag.
So mining stocks can still go up. You can still make a lot of money on them. You just have to be careful. And if you buy and hold these things and don't check your account and you check five or six years later, you're gonna potentially end up like something that happened with Hecla. There's a, there's a longer list of smaller miners that have gone bust. But I'm picking on Hecla because Hecla is over 100 years old. You would think that they would know better. They've been through bull markets, they've been through bear markets, they've been through sideways markets. It's not like they're a new mining company. You'd think that they would know better.
Kirsten says, "Many people are buying gold instead." Well, without the miners actually producing the gold, there's not going to be as much physical gold available. So part of the paper price manipulation is that there has to be more mining supply. And this is what has allowed silver to be capped. There's a ton of extra silver by-product because the Chinese have created enormous artificial demand for copper, nickel, base metals. And silver is a very common byproduct on copper and base metal mines. So there's, there could be, there's at least 100 million ounces per year of silver by-product that should not be online that is available now. But there might be 200 million ounces. Someone would have to do the work. It would take a ton of research work to do that. It would take many, many hours, hundreds of hours to do that to look up the mine plans and all the different base metal and copper mines. It would just be too much work to do for free on a free podcast. Way too much work.
So I think I've covered things pretty good where there's three main concerns with a mining company. With the debt that the mining company takes on because they can't control the commodity price, which means their revenues are not predictable because they don't, they don't hedge their, I don't want them to hedge, but they don't hedge their commodity prices. So their revenues are very unpredictable. And then when you take debt on in a bear market, you can get bankrupt very easily because the bear market lasts longer than you stay solvent. And that's the situation with Tecla. Hecla over-leveraged their balance sheet. Maybe they get rid of the debt with share dilutions and a reverse stock split. But then they still have to fix the production problems at the mines that they have problems at. And that's gonna require a lot of capex. That's two big problems that Hecla has to fix in a short amount of time. So do they have the resources and do they have the time to fix this in time? I don't know. I would not bet. I would not be a long-term better on long shares. In the short term, you may be able to get a pop on Hecla. But then you could see a pre-packaged bankruptcy or just massive share, massive share dilutions on Hecla in the next four to six months. So if gold goes over $1400, you're gonna see not only Hecla, but a lot of these other miners just go right to the share dilution. And then you're gonna see some of these miners have 10%, 15%, 20% down in a week or two, unless the metals price just goes, go price keeps going crazy higher. But if it, if it doesn't go super higher, you're gonna see that share dilutions. People are starting to take, gonna start to get worried again.
I don't want to answer specific gold stocks, specific gold mining stocks. In general, I tend to prefer the royalty and streaming companies because they don't over-leverage. They don't lie about their costs. In fact, the royalty and streaming companies take advantage of the mining companies. But they can be flexible, though. So if there's a, if there's a deal that's not making the royalty, that's not making the mining company any money anymore, they can just amend the royalty and streaming contract. You saw Franco Nevada do that with Coeur d'Alene on the Palmarejo gold stream. Franco Nevada took him to the cleaners in 2009. I think Franco Nevada bought over a billion dollars worth of gold at the Palmarejo mine for $80 million in cash. And then I think in 2014, then the gold stream had to be amended because Coeur d'Alene was losing so much money at the mine. But Franco Nevada has made enormous profits on that deal. They only put $80 million into the deal. I think they got payback in only a couple years. But the, the industry, the industry is just very frustrating because there's always a capex surprise. And the capex surprises are almost never good. Capex are almost never, they're never good because there's so much maintenance capex that has to go into a mine. Or if you want to upgrade the mine and improve recoveries, you have to put a lot of extra capital in. So any, the average investor, even some of these mining analysts, are gonna miss this. They're not going to be paying attention to a mining company unless they're getting paid to cover it. Like a handful of these mining companies as a day job. They may miss at this mining company. All of a sudden, after not paying attention to, excuse me, after not paying attention to them, excuse me again, getting tongue-tied. I haven't had any water yet. I am not, I'm doing this without notes, by the way. This is all just off the top of my head because I have so much experience now in the gold and silver mining industry that these companies, if you're covering a mining company and then you're not getting paid to do it on a daily basis, and all of a sudden you don't pay attention to the mining company for a month or two, and then you see that the mining company slipped it in that, "Oh, we have to spend an extra $200 million to upgrade this mine," or, "Oh, we have to spend an extra $200 million to fix something at this mine." Well, guess what? These mines are marginal. Some of them, some of them are very, very marginal. And that $200 million is gonna potentially blow through all the company's cash. You saw this with First Majestic Silver. First Majestic Silver had emergency capex expenditures on Santa Elena mine and I think San Dimas, which were their two best mines. And they had $100, they had always kept $100 million in cash on their balance sheet for years. And they could not go to the market because silver price was doing so bad and raised more equity or nearly enough. I think they did one small capital raise with equity, but it was nowhere near enough. And they had to put like $60 or $70 million dollars into capex into those two mines to make the investments to lower the cost of the mines so those mines could be economic, um, generating free cash flow again. And First Majestic Silver, all of a sudden, their cash balance then went from $100 million dollars, which they had always kept it at, down to I think below $50 temporarily. It seems that First Majestic Silver now is in better shape. But it was a really dangerous situation for them for about 12 months. If that mining upgrade was not executed on-time and on-budget, let's see, there was another $70 million or $100 million needed that they had underestimated the costs. And there was problems with construction, getting the mine back, back into production at the normal production levels and getting the cost lower would have been horrible. So these are the bad surprises and the dangers of the industry. And the industry is fraught with them. And the CEOs in general, a lot of them are not honest. You go ahead and email Investor Relations and ask them to list, to put out a list of itemized all-in sustaining cost list. I don't think you'll get it.
So this, this is how the industry has been. And it's gotten worse for a while. And hopefully, there will be more transparency in the future. So the all-in sustaining cost is a good metric. I would like to see improvement there. It is a big improvement from just cash costs. And I would like to see SSR Mining put their all-in sustaining cost everywhere. It should be everywhere. You should not have to go to management discussion and analysis on page seven or eight of a 30-page document and find it in one sentence. And then there were two estimates actually, if I remember correctly, there are two estimates within a paragraph, which was just confusing to me. And then I ran the numbers to reverse engineer, given what they said their free cash flow numbers was, and I came up with mid-$1100 an ounce gold. So they were reporting that their cash costs were $700 an ounce. And then only in their management discussion and analysis area did you find any mention whatsoever of their all-in sustaining costs. But I ran the numbers myself to see what it was two months ago. And the numbers I came up with were a little bit above $1100. So the average investor is not going to do this. And then if the company gets problems with their mines or costs go out of control, then they're gonna wonder why the company just raised money when they're telling everyone in all their investor presentations and public documents that their costs are $700.
So I think I've highlighted a lot of the problems. Again, I didn't use notes, so my lecture is kind of all over the place. I'm not doing this at a college or anything like that. But I think this will help you guys out a lot. So the moral of the story, and this is not financial advice, is if you are buying individual mining stocks, you have to have an exit plan. Okay? There could be a surprise capex bomb coming in the near at any point. There could be a problem at the mine. There could be a strike at the mine. The company could lose cash flow and have too much debt and have to start selling shares or come or selling assets to raise cash. There's tons of bad surprises out of mining at a mining company in a mine. And the mining companies with their, initially with their cash costs, the mining companies were not reporting a ton of their other costs like costs of capital, selling, general, and administrative expenses. These are expenses that any other business in any other industry would report. And the mining companies were not reporting these things. So hopefully, there will be more transparency. Unfortunately, with a lot of publicly traded companies, sometimes the only way to stop this is with class-action lawsuits. I wish there was a different way. But you're seeing this now in the shale oil patch. And I think that's gonna help things. But the shale oil patch is a mess still, from what I understand. There are many, many hundreds of class-action lawsuits because there are hundreds of conference calls from these shale oil companies going back 10 or 11 years where the management teams were promising earnings, promising free cash flow, claiming their costs were a lot lower, claiming their reserves were higher. And it was all fraud and lies.
Okay guys, well, I think I covered everything I wanted to. I may have missed a couple of examples, but I think I got through everything. And I will attach links to videos of some of my old presentations. They're going back through the financial statements and showing you guys the discrepancies between the numbers that the company claimed, what they claim their all-in sustaining costs were, and what their financials were. And me reverse engineering and showing what their real costs were based on the free cash flow that they released. It does it in a lot of cases, even now, it still does not match their all-in sustaining costs. Although the discrepancies are a lot less. There are still some companies with 20% to 30% discrepancies. But it is getting better. Okay, bye for now. And I will work on getting that Brent Johnson interview edited and up either later today or tomorrow. Everyone have a nice weekend. And hopefully, I will be able to see my friends visiting from New Zealand who are in town now. Okay, bye.