Australian gold miners have been cranking up production in the last half of 2013 in response to the fall in gold prices. After cutting back exploration projects and slashing overhead costs as first responses, many gold companies also shifted their approach to production.
In an effort to lower production costs they have switched away from mining low-grade ore deposits which are expensive to operate, instead targeting ore deposits with higher concentrations of gold which lowers costs relative to the volumes produced.
It's a tactic that can be highly effective. Silver Lake Resources Limited. (ASX: SLR) for instance reduced ore mined by 7.5% in the quarter to December 31 2013, yet increased gold production by 2%, as can be seen on the table below.
|
Company |
Gold Production Dec Quarter 2013 (oz) |
Gold Production Sep Quarter 2013 (oz) |
Change (%) |
| Newcrest Mining Limited (NCM) |
621,125 |
586,573 |
6% |
| Regis Resources (RRL) |
71,991 |
69,878 |
3% |
| Silver Lake Resources (SLR) |
61,152 |
59,902 |
2% |
| Kingsgate Consolidated (KCN) |
54,539 |
50,786 |
7% |
| Northern Star Resources (NST) |
24,410 |
26,009 |
-6% |
Above: Comparison of production changes for selected ASX gold producers. Source: Company releases.
The country's largest gold producer, Newcrest Mining Limited (ASX: NCM), increased production by 6% in the quarter and it was the company's Telfer mine in Western Australia that was the real star of the show. Production was up 27% as a result of a 21% increase in the grade of ore being mined and a 9% increase in mill throughput. The mine had a massive 26% reduction in all-in sustaining costs to $957 per ounce, well below the average realised gold price of $1,372 per ounce.
Another good performer was Kingsgate Consolidated Limited (ASX: KCN). The company achieved a 7% increase in production and a 12% decrease in cash costs compared to the September quarter.
Northern Star Resources Ltd (ASX: NST) was the only company of the five to finish the quarter with lower production. This was due to a five-day mill shutdown to allow the company to add in a second gravity circuit – a component which should help to increase gold recovery going forward. Production was still up 18% over the 20,515 ounces produced in the December quarter in 2012.
Foolish takeaway
The shift in strategy to target higher grade ore has been paying off for gold miners so far and allowed companies to reaffirm and even raise full-year production forecasts. This is a positive sign for investors, highlighting the positive steps these producers are taking in response to low gold prices.
