Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold prices fell on Monday as traders locked in profits after last week’s rally that boosted prices from 4-1/2-year lows.
Spot gold was down 0.6% at $1,171.80 an ounce, while U.S. gold futures for December dropped 0.6% to $1,162.90 an ounce around 11:00 a.m. on the Comex in New York.
Some analysts believe Friday’s rally was a brief break for the precious metal prices, triggered by a stronger dollar and expectations that the Federal Reserve will raise interest rates as the economy improves, cutting demand for a store of value.
They think that as far as the Bank of Japan and European Central Bank remain on an easing path the dollar is likely to continue its ascent, pushing gold down further.
Source: Kitco.com.
“We’ve had a bit of a bounce and I think we’re going to go sideways for a while, but at the moment the risk is the downside,” Simon Weeks, head of precious metals at Bank of Nova Scotia told Reuters.
Miners that spend more than $1,100 to produce an ounce of gold are racing to cut costs.
Canada-based Kinross Gold (TSE:K) (NYSE:KGC), which has mines and projects in the United States, Brazil, Chile, Russia, Ghana and Mauritania, has said is not afraid of making tough decisions. The Toronto-based firm has already said it would not expand its Tasiast gold mine in Mauritania if lower gold prices persist. Tasiast, which has suffered multiple writedowns, is more expensive to operate than the rest of Kinross’ mines.
Iamgold Corp. (TSE:IMG), another Toronto-based miner with operations in Canada, South America and West Africa, spent nearly $1,200 to produce an ounce of gold in the first quarter. That was whittled down to $1,136 in the following quarter.
In comparison, South African Harmony Gold (NYSE:HMY) (JSE:HAR) spent $1,245 to produce an ounce.
There are producers making money at current prices. In the third quarter, so-called all-in sustaining cash costs were $834 an ounce for precious metal giant Barrick Gold (NYSE, TSE:ABX) and $711 for Englewood, Colorado-based Alacer Gold Corp. (TSE:ASR). The measurement includes the expense of mining and replacing reserves through exploration, as well as other costs like corporate expenses. Not all mining companies calculate this figure the same way, and not all companies report it.
5 Comments
Michael Cordell
Currencies are more homogeneous than ever before. Foreign holders of Gold benefit because their Gold will be worth more in their own currency as the Dollar strengthens. Let the paper speculators sell their Dollar isolation theory. Gold is the only true currency.
silbershark
It’s Time for miners Halt sales.
No Silver, No Gold , after few days you see Two moon Rocket !
LAMB
Miners that are producing gold at $1100-1200/ounce should NOT be in business. They have gambled that the price will escalate to those high levels everyone has been dreaming about, now they are faced with shutting down production and have to face angry shareholders as they see their investment disappear.
phrank
Michael, please explain what you mean by the term “homo” and if gold is the only true currency…ugh…how much to you have?
paul
Unbelievable that these incompetent pompous jerks cant generate a profit at such a high price level. No wonder the exploration/mining industry is dead last on most investors list of investment options. Has been called a sunset industry until a new generation and mentality takes over/