Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

Can the gold industry avoid the sins of the past?

Can the gold industry avoid the sins of the past?

On deeper analysis, maybe not.

by Warren Dick

The gold industry has made painful choices that have led to improved financial positions and returns, but are the changes sustainable, and have they been enough to avoid the same errors from creeping in as the gold price begins to rise and factors outside of the industry reverse?

This was the question posed by Gold Fields CEO Nick Holland at his keynote presentation to the Australasian Institute of Mining & Metallurgy in Brisbane on Monday. Holland opted to analyse how the industry – as measured by the 11 largest gold producers responsible for roughly 30% of production – had fared over the four years between 2012 and the end of 2015.

The biggest casualty was the gold price, which, after peaking in 2011 at $1 900 per ounce, dropped to just over $1 000 an ounce in December 2015. This imposed all sorts of changes on the industry according to Holland. “The producers of course reacted. We cut our costs significantly.” By Holland’s calculations, all-in sustaining costs (AISC) fell by 22% over the period, and all-in costs (AIC) by 36%. (AIC includes stay-in-business capital which comprises the exploration and capital expenditure required to sustain operations).

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