U.S. Mining Winning The Costs Race – by Tim Treadgold (Forbes Magazine – August 13, 2014)


Mining booms are nearly always driven by rising commodity prices but what’s happening in the U.S. today indicates that falling costs are the driving force behind a revitalized interest in all forms of resources, from oil and gas to gold.

Activist investors, sometimes criticized for being too aggressive, have spotted the value gap developing between international mining and oil operations and those in the country winning the low-cost race, the U.S.

Cliffs Natural Resources CLF -3.04% and Apache APA -0.67% Corporation have been targeted by activist funds demanding the sale of high-cost, low-profit, assets in Australia, with Cliffs under pressure to sell an iron ore mine in Western Australia, and Apache planning to sell a 13% stake in a big Australian liquefied natural gas project being developed by Chevron CVX -0.5% Corporation.

Both U.S.-based companies will probably re-invest the capital generated in U.S. projects in much the same way some industrial companies are shifting their international operations back to the U.S. because it has become the global go-to destination, in some cases surpassing the long-term low-cost leaders, China and Germany.

Gold Cheapest To Mine In The Americas

In the commodity world, the value-gap is best illustrated by that universal material gold, with the cost profile of one company demonstrating why the U.S. is a preferred destination for new mine developments.

AngloGold Ashanti AU -0.45%, a South African-based business which was once the gold arm of the world’s fourth biggest mining company, London-based Anglo American PLC, has goldmines around the world, with four major divisions: South Africa, Continental Africa, Australia and the Americas, a division which includes the big Cripple Creek & Victor mine in Colorado.

Earlier this week, AngloGold reported a 4% rise in group gold production to just over one million ounces for the June quarter, with costs on a year-to-year basis down 7% to an average of $836 an ounce, comfortably below the gold price of around $1300/oz.

For the rest of this column, click here: http://www.forbes.com/sites/timtreadgold/2014/08/13/u-s-mining-winning-the-costs-race/