There is a lot of emphasis currently on all in sustaining cost (AISC) profiles, a cost metric put forward by the World Gold Council. While I think that this metric is suitable for a relative measure for a comparison of assets, a better measure of the cost of an operation is looking at the EBITDA (earnings before interest, tax and depreciation) margin.

This is the proportion of EBITDA over gross revenue expressed as a percent. With this metric, we do not have to concern ourselves about by-product versus co-product accounting or gold equivalent ounces or any other cryptic accounting measure. I would also feel more confident if the financial statements were audited by an independent firm.

It is critical that one check the company’s balance sheet. Major gold producers such as Barrick Gold are divesting assets to lower their debt burden. A company’s ability to pay back its debt is measured by a ratio of Net debt (debt minus cash) to EBITDA (earnings before interest, tax and depreciation). Barrick Gold has a Net debt to EBITDA ratio of ~2.7x while a ratio of over 4.0 is considered very risky. If all a company’s free cash flow goes to alleviating a debt burden, there is not much left over for the shareholders. So I prefer companies with low Net debt to EBITDA ratios.

http://www.kitco.com/commentaries/2016-01-08/Going-Where-Reward-Exceeds-Risk.html