There have been a few surprises in the latest round of quarterly reports issued by Australia's gold miners, particularly for costs. Results for the December quarter show a mixed bag, but the surprise stand out was gold-giant Newcrest Mining Limited (ASX: NCM).
After a terrible year in 2013, Newcrest finally gave investors something to cheer about, knocking almost 16% off its all-in sustaining cost per ounce for the quarter to $921 per ounce of gold.
The progress was achieved in part through an impressive 6% increase in production for the quarter, as well as lower levels of production stripping, lower sustaining capital costs and a "cost-out" focus company wide. The decrease puts Newcrest amongst the lowest ASX listed cost producers for the quarter and is even more impressive given each operation had an all-in sustaining cost below the realised gold price.
Kingsgate Consolidated Limited (ASX: KCN) also achieved a strong reduction in costs for the quarter on lower operating costs, but was higher than several of its peers, as can be seen in the table below:
|
Company |
All-in sustaining costs per oz, December Qtr
|
All-in sustaining costs per oz, September Qtr |
Change (%) |
| Newcrest Mining Limited (NCM) |
$921 |
$1,093 |
-15.7% |
| Silver Lake Resources (SLR) |
$1,159¹ |
$1,098¹ |
0.5% |
| Kingsgate Consolidated (KCN) |
$1,209² |
$1,401³ |
-13.7% |
| Northern Star Resources (NST) |
$1,156 |
$996 |
16% |
Source: company releases Notes: ¹Mount Monger Operations. ²USD $1,055. ³USD $1,223
The rise in costs for Northern Star Resources Ltd (ASX: NST) was the highest. The company made a non-cash accounting adjustment of $132 per ounce, which is included in the all-in sustaining cost figure. This is in line with the World Gold Council's guidance on all-in sustaining costs, a non-standard (GAAP) accounting measure.
Silver Lake Resources Limited. (ASX: SLR) had a minor increase in cost at its Mount Monger Operations which account for 72% of forecast production. The company's Murchison gold mine however suffered high costs per unit as a result of efforts to focus on production from open pit sources, rather than the underground operations. Silver Lake is currently undertaking a 'full strategic review' of its Murchison operations which will be in the March quarterly report.
Foolish takeaway
Low sustaining costs can mean the difference been profit and loss for gold miners and remain a huge focus in the current environment. Newcrest Mining had a standout result for the quarter, but investors looking to add gold producers to their portfolio should view costs as one piece of the puzzle, alongside low debt and good long-term growth prospects. This reduces the risk of share price falls should further volatility strike.
