Reference no: EM131437986

Read the Case " In South Africa, Gold Does Not Glitter Unless the Price is Right" and discuss the following question:

Why do you suppose that companies in other parts of the world, where gold near the surface can be extracted at relatively low average variable cost via "open pit mining," kept their gold mines open following  the drop in the world price of gold?Between late 2004 and late 2005, the price South African gold-mining firms received for the gold they produced declined by more than 20%. Most South African gold mines are very deep, which makes the average variable cost of extracting gold, mainly wages paid to miners specially trained to work in mines up to two miles underground, relatively high. Consequently, when the price received by South African gold-mining companies dropped, the firms responded by shutting down some of their deepest mines.