Top 10 gold miners losing billions – but are they really? – by Lawrence Williams (Mineweb.com – February 25, 2014)

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Massive impairments suggest the world’s top 10 gold miners are in serious trouble, but this is just a financial accounting mechanism and doesn’t really adversely affect day to day operations and earnings.

LONDON (MINEWEB) – Based on recent headlines, non-financially-aware observer could be forgiven for thinking mining gold is a sure way to lose money, not to make it. Take the following batch from Mineweb over the past couple of weeks: Barrick cuts reserves 26%; reports $10.34 billion loss. Goldcorp reports $2.71 billion loss; cuts reserves 15%. Newmont Mining reports $2.5 billion loss for 2013.

Kinross Gold reports $3B loss: 33% cut in GEO reserves – to name the most recent. Overall, the world’s top 5 gold miners between them made book losses of some $20.8 billion in 2013. The smaller members of the Top 10 gold mining club who have reported to date all also made book losses, but not quite on the same scale, commensurate with their smaller outputs.

What may surprise the unsophisticated observer is that despite these enormous book losses, the companies have mostly still been able to pay dividends to shareholders, and also, in most cases, their stock prices are substantially higher than they were in December last year due to the rise in the gold price over this period. Such is the nature of modern day accounting! Indeed, in operating terms the miners are virtually all profitable, although not perhaps at the levels seen when the gold price was rather higher back in 2011/12.

We did warn of the kind of dire year facing the gold miners here on Mineweb back in July last year, but there was no great expertise involved in so doing given the ongoing dive in the gold price and the beginnings of the taking of the massive impairment charges we have been seeing.

Most of the impairments taken though just relate to revaluations of reserves as the miners rebase the gold price levels at which these reserves have been calculated – and in many cases also from operational restructuring, changes in forward mine plans and deferments in capital projects.

But will these losses be replaced by huge billion dollar gains should the gold price pick up again? One doubts this. Most of the big gold miners (with the exception of Goldcorp among the top 5) have seen their CEOs replaced – in some cases as scapegoats for full board decisions which proved perhaps misguided in a falling gold price scenario.

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