Barrick Gold Corporation (USA) (ABX), Goldcorp Inc. (USA) (GG), Newmont Mining Corp (NEM): When Will the Low Gold Price Start Affecting Miners?

Page 1 of 2

I recently wrote this article on the falling price of gold and how it was going to hurt mining companies. In summary, the article highlighted that the average all-in cost of the 20 largest gold miners in the world was $1,306 per ounce in Q4 2012; and if the price of gold falls below $1,300 per ounce, about 30% to 40% of mine production throughout the world is not cash-flow positive. In addition, the average, predicted all-in cost of the world’s five largest gold miners is between $1,000 and $1,200 for 2013.

However, as I write the price of gold is trading far below the $1,300 threshold.

Barrick Gold Corporation (USA) (NYSE:ABX)

So how will this affect miners directly?

As I have mentioned above, the predicted all-in cost for the world’s five-largest gold miners is between $1,000 and $1,200 for 2013. As of yet, as these are only predictions, it’s not possible to assess how this will affect miners.

Having said that, after looking at data from the company and online, it is possible to establish a more realistic and detailed view of what is happening to miners, and Barrick Gold Corporation (USA) (NYSE:ABX) in particular.

For example, this table shows how much it cost Barrick Gold to mine each ounce of gold in the first quarter of this year:

Region All-in cost (per ounce mined) Cash cost (per ounce mined)
North America $820-$870 $495-$545
South America $875-$925 $550-$600
Australia Pacific $1,200-$1,300 $880-$950

Barrick Gold Corporation (USA) (NYSE:ABX)It costs Barrick more to mine a single ounce of gold in the Australia Pacific region than it does anywhere else. Indeed, it is possible that in this region, the company could already be losing some money on its operations with the average all-in production cost averaging between $1,200 and $1,300 per ounce. The Australian region in particular is well known for its rapidly rising costs, as the mining boom has sent inflation skyward.

It’s not just Barrick that is already feeling the pressure

Goldcorp Inc. (USA) (NYSE:GG) does not provide an exact all-in cost for each of its mines, but the company does provide a cash cost per ounce for each of its mines and an all-in cost average across its whole operation. Based on the company’s all-in costs and overall cash costs, it is possible to establish that the company’s all-in cost is on average around 100% higher than its cash cost per ounce.

Goldcorp’s all-in costs per mine:

Mine Total cash costs All-in cost per mine approx.
Red Lake $476 $952
Porcupine $797 $1,594
Musselwhite $841 $1,682
Peñasquito $611 $1,222
Los Filos $589 $1,178
El Sauzal $946 $1,892
Marlin $102 $204
Marigold $854 $1,708
Wharf $836 $1,672
Alumbrera $14 $28
Pueblo Viejo $472 $944

In chart format:

Once again, based on these estimates, on an all-in cost basis, some of Goldcorp’s production could already be unprofitable.

And lastly…

Lastly, Newmont Mining Corp (NYSE:NEM), which does provide an all-in cost for each one of its mines. Once again, it would appear that some of its production is rapidly approaching the level when it becomes unprofitable.

Mine Gold production costs All-in cost
Africa $478.0 $555.0
Batu Hijau $960.0 $993.0
Waihi $911.0 $920.0
Tanami $1,195.0 $1,247.0
Jundee $672.0 $710.0
Kalgoorlie $968.0 $1,006.0
Boddington $854.0 $873.0
Yanacocha $520.0 $568.0
La Herradura $717.0 $733.0
Nevada $774.0 $814.0

Having said that, the company’s most expensive mine, Tanami, only accounts for 4.8% of Newmont’s total gold sales:

Gold Sold ’000 Oz Percentage of output
Africa 119 9.52%
Batu Hijau 7 0.56%
Waihi 30 2.40%
Tanami 60 4.80%
Jundee 76 6.08%
Kalgoorlie 74 5.92%
Boddington 200 16.00%
Yanacocha 278 22.24%
La Herradura 55 4.40%
Nevada 351 28.08%

So, Newmont’s most expensive mine has a very small contribution to the overall profitability of the company.

Foolish summary

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!