Gold Miners See Looming Output Drop After Cut in Mine Spending – by Liezel Hill (Bloomberg News – March 03, 2014)

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The biggest gold producers say global output will fall short of expectations and is poised to decline after the worst price slump in three decades spurred them to cut spending and revise mining plans.

Barrick Gold Corp., Goldcorp Inc. and Newmont Mining Corp., the three biggest producers by market value, say the industry has changed after gold plunged 28 percent last year. The decline forced miners to take at least $30 billion of writedowns.

“The industry has gotten more disciplined,” Barrick Chief Executive Officer Jamie Sokalsky said in a Feb. 24 interview. “We are in an inflection point now where I think ultimately gold production in the industry could start to decline more than people think.”

Sokalsky said lower mine output may support gold prices. Demand for physical metal is growing in China, according to Sean Boyd, the CEO of Canada’s Agnico Eagle Mines Ltd. Central banks, net purchasers for four straight years, will keep buying, he said in an interview. The outlook for gold will be on the minds of many at the annual Prospectors & Developers Associated of Canada convention which began yesterday in Toronto.

Gold fell 0.4 percent to $1,326.39 an ounce on Feb. 28 in London. After posting its biggest annual loss in 32 years, the metal is up 10 percent in 2014.

“I think we can start to move back above $1,400, $1,500 very easily this year,” Sokalsky, 56, said last week in Hollywood, Florida, where he and Boyd were attending a mining industry conference. The median of analysts’ estimates compiled by Bloomberg is for bullion averaging $1,210 an ounce this year and $1,215 in 2015.

No Consensus

“We’ve seen the lows for gold and we’re seeing a lot of fundamentals in the marketplace that should be very supportive,” Sokalsky said.

There’s no clear consensus among producers about when exactly mine supply will start declining. McEwen Mining Inc. Chairman and CEO Rob McEwen sees it falling this year and Goldcorp CEO Chuck Jeannes wouldn’t be surprised if that were the case, they said in separate interviews. Newmont CEO Gary Goldberg predicts output will rise in 2013 and fall after that.

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