Posted on 11/29/2014 2:48:30 PM PST by OneLoyalAmerican
Gold miners’ costs are mostly higher than current spot prices, increasing the likelihood of writedowns next year, according to Nick Holland, chief executive officer of Gold Fields Ltd.
Across the industry, costs are about $1,300 an ounce including debt repayments, Holland said by phone from Johannesburg today, citing analysts’ research. Gold dropped 0.1 percent to $1,182 an ounce, bringing the decline since the beginning of 2013 to 29 percent.
“The industry by and large is under water,” Holland said. “I would expect further writedowns. Production I think will be curtailed but it will take some time to filter through the system.”
Gold producers are struggling to adapt to a lower bullion price after a decade of debt-fueled expansion, acquisitions and cost inflation during the boom years that saw bullion peak at $1,921.17 an ounce in September 2011. The spot price has tumbled in the past 18 months as investors speculate the Federal Reserve will raise interest rates due to an improving U.S. economy, lowering demand for the safe-haven metal.
Gold Fields is able to “ride this through” as it has a break-even price of about $1,050 an ounce, or $1,090 an ounce including debt repayments, Holland said. While the company calculates its reserves at $1,300 an ounce, that number includes a 15 percent profit margin, he said.
“Everything is fine for now, obviously the margin won’t be 15 percent at the current price, it will be less than that,” Holland said. “That said, the business continues to be run the same as before.”
Profit Drop
Gold Fields dropped 4.8 percent at 9:16 a.m. today in Johannesburg after the precious metal fell 1.2 percent yesterday, largely after South African trading hours. The FTSE/JSE Africa Gold Mining Index decreased 5.1 percent to 1,091.8.
Headline earnings for the South African producer with mines from Peru to Australia were $14 million in the three months to Sept. 30, compared with $18 million the previous quarter, it said in a statement today.
The Johannesburg-based company, which spun off three of its cash-generative but old South African mines to create Sibanye Gold Ltd. last year, is seeking to “aggressively” pay down debt over the next three years as it adjusts to the lower gold price, Holland said. The company is also on the lookout for cheap, in-production acquisitions that more troubled miners are offloading.
Gold Fields reduced net debt in the quarter by $137 million to $1.5 billion. All-in sustaining costs for the year are expected to be 3 percent lower than previous forecast at $1,090 an ounce, it said.
Gold production rose 2 percent to 559,000 ounces in the quarter compared with the previous three months, the company said.
As I heard it, with his new D-10 dozer, the fuel costs have gone up to $8K per week. The new D-10 was $300,000.
I dunno, the Viking seems to know what he’s about.
I agree. I am buying gold hand over fist.
Wait, the ads on Rush’s/Sean’s show says 2000 oz gold before the end of the year.
It better get a move on.
Gold goes up, gold goes down.
Right now its down and the crony bankers are pleased. The crony bankers will eventually screw things up like they always do and then gold will go back up.
Nothing feels quite so good as a one ounce .999 fine gold coin in the hand.
I can’t help but wonder when I watch the show what their margins would be I’d they ran all those huge diesels on natural gas at a price that would way below what they are paying now.
seems like the stock market is a sucker’s bet right now and gold is probably pretty safe. Gold has never really been about returns. It’s was just a hedge against inflation. It does seem like there’s a potential for inflation.
I was under the impression that Todd had rented/leased the equipment, though I could very well be mistaken.
I do enjoy the show, though.
Sounds like their problem is debt more than anything.
Todd bought the new processor for 300 oz of gold, 100 down , 200 at end of season.
Lets see 20% to the lease holders, 100oz minimum, after that he owes 50% to Dave, 200oz to whats his name for the plant, plus he will owe wages to Thurber and the rest of the crew. Todd better hope that lake thaws out.
Are you calling Alex Trebek a liar?! ;d
“Lets see 20% to the lease holders, 100oz minimum, after that he owes 50% to Dave, 200oz to whats his name for the plant, plus he will owe wages to Thurber and the rest of the crew. “
And fuel costs.
Reminds me of one of those of old-timey stock hustlers that would sell 500% of the company’s equity.
All depends on your timeline.
The current game can’t go on forever.
The question is how long can they keep the game up....
Dave gets 50% of the bills along with 50% of the profits.
The hearing is the first thing to go, or so I hear.. Or maybe not. ;-)
It ain’t cheap running them rigs.. And Alaska is energy rich to boot.
Yeah....FOOLS gold : )
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