Production, labour, cost issues weigh down the world’s top gold miners – by Lawrence Williams ( – November 2, 2012)

With the exception of Goldcorp, third quarter results from the big five global gold miners are looking pretty dire.

LONDON (MINEWEB) – This doesn’t look like being a good quarter for the world’s top five gold miners, with only Goldcorp the exception. Both Barrick and Newmont have published figures for the quarter which will have seriously disappointed analysts, while South Africa’s two top producers have of course been suffering badly from the wave of worker dissent in their main country of production which followed on from the platinum mine strikes and the Marikana massacre.

Let’s consider the major miners individually:

Barrick Gold, the world’s largest gold miner, not only saw third quarter earnings fall by 55% compared with a year ago – but also had to report yet another increased capital cost estimate for its massive Pascua Lama project straddling the Argentinean/Chilean border. The project cost now stands at an enormous $8-$8.5 billion, effectively $1billion more than the previous figures only re-estimated a quarter earlier, and getting on for three times the original cost estimate of only three years ago.

This does not bode well for the final project capital cost – indeed the company intimated in its quarterly announcement that even these figures were not necessarily final – and the history of cost pressures suggests that any further adjustments are more likely to be up than down. Nevertheless the company’s CEO, Jamie Sokalsky, did express overall confidence in the project and its ultimate contribution to Barrick earnings.

But Barrick’s Q3 woes didn’t end with Pascua Lama. Production and cost pressures impacted the company’s Australian and African operations – the latter possibly about to be sold off to the Chinese – and there have been difficulties with final permitting for the Jabal Sayid copper mine in Saudi Arabia where explosives controls did not initially meet Saudi requirements, creating a delay. Nevertheless Sokalsky still expects Barrick to meet its gold production guidance for the year, while copper output will likely be a little below target because of the Jabal Sayid delay.

Overall Barrick Q3 earnings were down 55% on a year ago and Barrick stock was marked down sharply.

For a further more detailed look at Barricks Q3 and 9-month figures see: Barrick again revises Pascua Lama Project capex to $8bn-$8.5bn

World No. 2 gold miner, Newmont Mining also came up with below expectation figures in Q3, although it is maintaining guidance for full year gold and copper production, albeit at the lower ends of the forecasted range. Q3 earnings for the miner were down 19% year on year. Here again regional issues in its Asia/Pacific and West African mines were the main contributors to the fall in comparison with a year ago.

Its big Batu Hijau operation in Indonesia was the main culprit with a huge fall in gold production year on year, which Newmont says was scheduled due to planned stripping operations, and pushing lower grade stockpile material through the mill leading to a reduction of 89% in gold output and 54% in copper output.

(The mine only produced 7,000 ounces of gold in Q3 as against 65,000 ounces a year ago.) Its Australian and New Zealand operations also disappointed. However its Nevada mines and Yanacocha in Peru had good quarters which substantially mitigated the adverse effect on earnings from elsewhere.

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