Major north American gold majors are under the pump – by Lawrie Williams (Mineweb.com – August 10, 2015)

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While the major North American gold mining companies are successfully cutting costs to keep their heads above water, it’s far from all plain sailing.

LONDON – With the quarterly and half-yearly reporting season well under way we can report that most of the top North American gold miners, which have all now reported their 2nd quarter figures, have been continuing to make progress in cutting costs. Here we are looking at the gold miners projected to produce in excess of 1 million ounces (circa. 31 tonnes) of gold, or gold equivalent, in the current year.

All, bar Kinross Gold, have come in with All-In Sustaining Costs (AISC) guidance figures for the year at comfortably under the $1,000/oz ounce level which leaves them in a relatively strong position in the current weak gold price environment.

Indeed as multi-operational gold producers, they probably have more scope for further cost cutting should prices weaken further, although at the expense of reducing reserve levels in tonnage terms, and more flexibility in making potential closure or divestment decisions concerning marginal or unprofitable operations.

But so saying, while corresponding earnings figures may be better than might have been anticipated given the gold price falls, continuing write-downs are making financials look depressing in terms of the reported bottom line figures. And with the gold price seemingly unable to break back above the $1,100/oz level and virtually every mainstream analyst predicting further falls, we can’t see much in the way of better things ahead in the 3rd quarter bar a major sea change in sentiment towards precious metals or some massive global ‘black swan’ event.

However, in investment terms, the relatively low AISC guidance figures, which again are now mostly a little lower than guided at the beginning of the year, mean that they are all capable of riding out a degree of further gold price weaknesses that some of their mid-tier and junior colleagues may not be able to do.

The media has made much of some companies investigating contingency arrangements should the gold price drop below $1,000 or $900, but this doesn’t mean they expect this to happen. But they would be failing in their fiduciary duties were they not to look at this ‘just in case’ scenario. Indeed with so many bank analysts predicting falls, it would be surprising were they not doing so.

Barrick Gold is the latest of the North American gold mining majors to report 2nd quarter and first half figures, and the report could be considered a positive one in some respects.

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