Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Gold miners face another round of cost cuts suggests Goldman

Gold miners face another round of cost cuts suggests Goldman

Gold miners have worked hard to cut costs to offset a falling gold price, but Goldman Sachs expects the price to fall again in 2014 leaving them with limited options.

According to the US broker, cost cutting initiatives undertaken by the gold companies it covers have led to many mines with cash costs now below the spot gold price.

Goldman, though, expects the spot price in 2014 to fall to $1,144/oz, at which level more than 50% of these miners would burn cash.

There is little more they can do to reduce costs further given that most restructuring has been completed and further reduction in sustaining capex would reduce the face availability for mining in the future.

“Miners can deal with c.$1,300/oz but a sustained lower level would need another round of restructuring, in our view – most likely mine closures and more severe cost reduction.”

As a result, Goldman only has two buy recommendations and none among the London listed companies.

RandGold Resources (LON:RRS neutral) remains one of the best-positioned names with low total costs, strong near-term growth and a strong balance sheet, but on its price outlook Goldman Sachs does not see any strong catalyst for the shares that is not already priced other than a higher gold price and that would benefit higher cost miners more.

Goldman has neutral recommendations for juniors Aureus (LON:AUE Liberia with a 42p price target) and Centamin (LON:CEY Egypt 55p).

However, higher cost, more highly geared and negative free cash flow such as African Barrick (LON:ABG) are sells, according to Goldman.

PhilW.jpg
Why Invest In Avesoro Resources? Read More Here

Register here to be notified of future ASO Company articles
View full ASO profile

Avesoro Resources Timeline

Newswire
November 14 2016

Related Articles

gold nuggets on a table
March 20 2017
The junior miner is making strides in developing its five gold-focused projects in Western Australia and Tasmania
logan_=_brik_prperty.png
January 20 2017
Last year, it struck an option deal with Pilot Gold Inc, whereby it can evaluate nine exploration projects
FKJ-083 at Choco
January 24 2017
Grades and trial mining analysis have to date confirmed reported grades and conditions from historic third party mining operations.

© Proactive Investors 2017

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use