It is strangely ironic that gold, the precious metal symbolising the pinnacle of human achievement (gold medals), wealth (gold coins) and status (gold loyalty status), should become such a terrible investment.
But as the price for gold sinks towards US$1,100 per ounce, are gold miners like Newcrest Mining Limited (ASX: NCM) and Kingsgate Consolidated Limited (ASX: KCN) making money, or should they be avoided?
Fortunately, Australia's gold miners are currently being sheltered by the falling Aussie dollar which means the current gold price (US$1,140 per ounce (oz)) converts to around AU$1,329.
Based on the most recent quarterly updates and All-In Sustaining Costs (AISC), one of the big losers could be Silver Lake Resources Limited (ASX: SLR).
With an AISC of $1,383 Silver Lake would likely be losing money on each ounce of gold it sold were it not for its smart hedging bet.
| Company | ASIC Sep Q 2014 | Average gold price received |
| Newcrest Mining Limited (ASX: NCM) | $864 | $1,393 |
| Northern Star Resources Limited (ASX: NST) | $1,043 | $1,399 |
| Evolution Mining Limited (ASX: EVN) | $1,083 | $1,431 |
| Kingsgate Consolidated Limited (ASX: KCN)¹ | $1,252 | $1,487 |
| Beadell Resources Limited (ASX: BDR)¹ | $1,307 | $1,445 |
| Silver Lake Resources Limited (ASX: SLR)² | $1,383 | $1,472 |
Source: Company quarterly updates.
Notes: ¹reported in USD, converted to AUD; ²SLR Mount Monger Operations only – accounts for 94.1% of production
Silver Lake's gold hedging programme covers it for 20,360 ounces between October 2014 and March 2015 at an average forward price of $1,542 per oz. Unfortunately the volume hedged is slightly less than the company's total September quarter production of 29,531 oz.
Just scraping though in the black is Beadell Resources Limited (ASX: BDR). For the September quarter the company had AISCs of $1,307 – just $22 below the price of gold at current exchange rates. Beadell's quarterly report made no mention of any hedging in place.
Newcrest Mining, Northern Star Resources Ltd (ASX: NST) and EVOLUTION FPO (ASX: EVN) are among the best placed companies with low AISCs and the highest likely margins.
Companies with high margins are an investor's safest bet against the falling price of gold which isn't likely to correct any time soon. As this article late last year points out, analysts were expecting a miserable year for gold, and it looks like Goldman Sachs Group could be bang-on with their forecast of US$1,110 per ounce.
