Prices and protests: gold miners' war on two fronts

Over the past twelve months, the price of gold has dropped over $500/oz and protest movements against gold miners around the world, with the help of social media, have become more prominent.

On the first front, as gold has descended in the direction of $1,000/oz, many of the big gold miners have become increasingly at risk of being priced out of operation. Not to mention the gold juniors, the majority of which will be fortunate to survive this fall.

Using the all-in sustaining costs measure (AISC) supported by the World Gold Council and an increasing number of gold industry professionals, market players such as African Barrick and Goldfields are already working under 'unsustainable' conditions.

The gold industry, and the broader mining industry, is beginning to grasp the importance of the second front – social and environmental opposition.

Over the past year, anti-gold protests have featured frequently and prominently in major international news outlets and across social media. Bucamaranga, Skouries and Rosia Montana come swiftly to mind.

Gold miners most often accused of environmental and human rights violations may be able to keep costs relatively low by cutting corners in the short term, but public backlash seems increasingly able to overwhelm such gains.

Goldcorp, a lower cost producer and no stranger to negative press, is one target of a new documentary called 'Gold Fever', which heavily criticizes the company's operations in San Miguel Ixtahuacán, Guatemala. The film has been shown at a number of film festivals and stars a number of high profile academics and activists such as the United Nations' James Anaya and long-time critic of the corporate world, Noam Chomsky.

This wave of opposition, however unbalanced it may at times be, is increasing alarm throughout the industry. Frustration is building.

At a recent mining conference in Vancouver, one recurring theme was that protesters and environmentalists are winning the battle for the public's 'hearts and minds' – to borrow a phrase – specifically with regard to the use of cyanide in gold extraction. At one point a mining professional stood up and treated the crowd to a long diatribe about being 'sick and tired of losing friends' and being told she was a 'bad person' because she worked in mining.

Mark Cutifani, current chairman of the International Council on Mining and Metals (ICMM), seems to understand these trends and has made improved sustainability performance the top priority of his tenure, realizing that the industry has more control over its environmental record and perception than the future of commodity prices.  

The two fronts have pushed gold miners around the world to scale down and suspend projects and they're also tempting some of the big players into diversification.

Gary Goldberg, CEO of the US's top gold producer Newmont Mining Corp., announced last month that he's open to expanding copper production, in addition to the company's core gold business.

"Two years ago you probably would not have been saying copper…there was a premium for gold producers."

Any moves into copper would help the company move downward on the cost curve and avoid more extreme "social, political and technical risks," according to Goldberg.

The last twelve months have been extremely challenging for the gold industry. How the industry decides to fight on these two fronts over the next twelve will have far-reaching implications for its future health.