Beadell Resources Limited (ASX: BDR) has been crowned the ASX's lowest cost gold producer for the most recent December quarter. The period covers the last three months of 2014 and Beadell's All-In Sustaining Cost (AISC) per ounce of $816 (US$638) was by far the lowest among nine of the biggest ASX-listed gold miners. This includes Newcrest Mining Limited (ASX: NCM), which had AISCs of $963 per ounce, and Northern Star Resources Limited (ASX: NST) at $1,073 per ounce.
| Company | ASIC Dec Qtr 2014 | % Change on Sep Qtr | Average gold price received |
| Beadell Resources Limited (ASX: BDR)¹ | $816 | -38% | $1,404 |
| Newcrest Mining Limited (ASX: NCM) | $963 | 11% | $1,402 |
| Northern Star Resources Limited (ASX: NST) | $1,073 | 3% | $1,417 |
Source: Company quarterly updates. Notes: ¹reported in USD, converted to AUD;
It is an astonishing result, especially compared to the economies of scale that big producers Newcrest and Northern Star achieve. At an average gold price of $1,445 per ounce (US$1,200) for the quarter, Beadell was likely earning a huge gross margin of 72%, compared to Newcrest Mining's 45.6%.
How did they do it?
Beadell has its flagship gold mine in Brazil and managed to slash costs by 38% compared to the previous September quarter. Average production costs were driven down by a massive increase in gold production; a duel result of increasing in mined material and processing higher grade ore. The combined result was a spectacular 75% increase in gold production over the prior September quarter.
Another significant factor has been the depreciation of the two currencies Beadell operates in relative to the US dollar. The Brazilian Real dropped 19% in the last six months of 2014, while the Australian dollar weakened 13%. For Beadell this means fewer US dollars are required to cover business costs in Australia and Brazil.
Should you buy?
So should you snap up shares in Beadell Resources? Perhaps a better question to ask is: are the costs sustainable? Well, not exactly. Guidance provided by the company for calendar year 2015 offers an expectation of All-In Sustaining Costs rising to between US$810 and US$890 per ounce. Meanwhile the other two key factors – the price of gold and currency rates – can be volatile and unpredictable.
Putting volatility aside, Beadell looks likely to remain among the lowest cost gold miners of 2015. Combine this with the price-to-earnings (P/E) ratio of just 2.6 and Beadell could prove to be an absolute bargain if the gold price and currencies continue to align.
