In 2012, Barrick Gold’s two most productive mines were Cortez and Goldstrike in Nevada, USA. Table 4.5 reports their financial performance. The “average cash cost” includes operating cost, royalties, and taxes, while the “average cost” includes the cash cost as well as amortization. a. Suppose that each mine produces at the rate where the (upward-sloping) marginal cost equals the price of gold. Illustrate the shifts in Goldstrike’s marginal cost curve, selling price, and production between 2010 and 2012. (Hints: The marginal cost curve changes over time. You have only one data point on each curve. Assume any other data necessary to draw the figures.) b. Use the 2012 data to compare the (i) short-run break-even conditions for Cortez and Goldstrike; and (ii) the long-run break-even conditions for the two mines. c. If the price of gold falls to $600 per ounce, how should Barrick adjust production at the two mines?
In 2012, Barrick Gold’s two most productive mines were Cortez and Goldstrike in Nevada, USA. Table 4.5 reports their financial performance. The “average cash cost” includes operating cost, royalties, and taxes, while the “average cost” includes the cash cost as well as amortization.
a. Suppose that each mine produces at the rate where the (upward-sloping) marginal cost equals the
b. Use the 2012 data to compare the (i) short-run break-even conditions for Cortez and Goldstrike; and (ii) the long-run break-even conditions for the two mines.
c. If the price of gold falls to $600 per ounce, how should Barrick adjust production at the two mines?
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