Gold Mining "Pretty Much" at Break-Even Worldwide on Price Slump
Friday, 12/20/2013 11:27
Gold price below $1200 equals expert estimates of world mining's all-in average...
GOLD PRICES below $1200 per ounce are likely worse than break-even for the world's gold mining sector, according to sector fund managers and analysts.
Speaking to the
Financial Times this week, Evy Hambro – the head of asset-management giant BlackRock's natural resources equity team – said that "The pricing that we're seeing in today's market is
very close to the all-in, break-even price that's needed to keep the gold companies at a cashflow neutral level.
"Whether that number's $1150 or $1250, it's pretty much close to where the price is trading right now."
Head of the Thomson Reuters GFMS consultancy, Rhona O'Connell recently put the average "all in" gold mining cost at $1200 per ounce worldwide, too.
Macquarie Research in Australia – the world's second-largest
gold mining country by weight behind China in 2012 – says
miners now face severe difficulties if their operating costs exceed $1000 per ounce and they have debt greater than 20% of their equity value.
Citigroup analysts go further, saying that gold mining producers have failed to cut costs fast enough to match the drop in market prices, and putting average all-in costs above $1500 per ounce for the first-half of 2013.
Gold prices ended June 2013 at a 3-year low of $1180 per ounce.
Looking at the top 3 gold mining firms by output, the MotleyFool investing site
says only Barrick, the world's largest listed gold miner (NYSE:ABX), has managed to cut costs so far in 2013.
Reviewing Barricks's latest regulatory filings shows that all-in sustaining cash costs – a measure enabling a gold mining firm both to produce and replace that output with new reserves in the ground – edged down to $916 per ounce this year from $945 on average across its operations in 2012.
Its close competitors, GoldCorp (GG) and Newmont (NEM), have both seen gold mining costs rise in contrast, up to $993 and $1100 per ounce respectively.
Pointing to the break-even price for gold miners as a possible floor for the market, "I think that's a key marker investors are looking at," says Blackrock's Hambro.
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