Centerra Gold, Evolution Mining were lowest-cost gold producers in Q4
One of the effects of the hit the gold price took after soaring to $1,900 an ounce in September 2011, was a concentrated effort on the part of producers to cut costs.
For years big gold mining companies kept on spending, on exploration, salaries, and big acquisitions, confident that the good times would keep rolling with the ever-advancing gold price. Those companies were in for a rude awakening when shareholders dumped them in droves following the gold price retracement of 2012-15. Suddenly acquisitions were put on hold, exploration spending dried up, and the mantra became: find ways to cut costs.
S&P Global Market Intelligence took a look at 19 publicly-listed, major gold companies in the last quarter of 2016, and found that for most of them, austerity continues to be key, especially with the gold price trending lower in Q4. Recall that gold bears were predicting that Donald Trump's plans for fiscal stimulus, including a $500 billion infrastructure spending program, would lead to strong U.S. economic expansion, ergo, higher interest rates – the nemesis of gold.
According to SNL Metals & Mining database, part of S&P Global Market Intelligence, the top 19 public gold companies produced gold at a weighted-average cost of US$868/oz, which is slightly lower than US$889/oz reported in the third quarter.
The lowest-cost producer, Centerra Gold (TSX:CG), mines gold at $586 an ounce, while the second-lowest in the group, ASX-listed Evolution Mining (ASX-EVN), produces at $674/oz. Barrick Gold (TSX, NYSE:ABX), the world's most valuable producer of the precious metal, was third on the list at $732 an ounce. Barrick's costs have dropped 12% in 2016, compared to 2015.
Topping the higher-cost end of the spectrum was Harmony Gold Mining (NYSE:HMY), which weighed in at $1,129/oz, followed by Detour Gold (TSX:DGF) and AngloGold Ashanti (NYSE:AU), which had AISCs of $1,124/oz and US$1,047/oz, respectively.
Some highlights from SNL Metals & Mining:
According to Scott Perry, Centerra's CEO, the company's favorable cost performance during 2016 can be attributed to the higher mill production and lower unit costs at the company's flagship Kumtor mine, compared with the previous year.
The acquisition of an economic interest in the Ernest Henry copper-gold mine in Queensland in November 2016 improved [Evolution Mining's] quarterly production by adding 14,257 oz of gold at AISC of A$114/oz. The acquisition is expected to further revamp the group's asset portfolio and improve its cost profile.
[Barrick] continued to strengthen its balance sheet, cutting debt and executing business development initiatives throughout the year. Continuing the trend, the company recently announced that it was consolidating its main assets in Nevada and expects to reduce gold production costs at its operations by US$100/oz.
According to Harmony's CEO, Peter Steenkamp, the 14% increase in all-in-sustaining costs (AISC) can be attributed to the labor cost increase under a three-year wage deal and to the winter tariffs during the period.