Which gold miner is the new king of low cost production?

March quarterly updates reveal some surprises on gold miners’ costs.

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Move over Newcrest Mining Limited (ASX: NCM), Beadell Resources Ltd (ASX: BDR) is the new king of low-cost gold production.

Beadell has squeezed past Newcrest after reporting its All-In Sustaining Cost (AISC) per ounce for the first time for the three months to March 2014. Brazilian focused Beadell reported an AISC of $937 per ounce compared to Newcrest’s $988.

Newcrest Mining’s costs were 7% higher than the previous December quarter after a 24% increase in sustaining capital expenditure per ounce and a 15% reduction in by-product credits per ounce produced.

It is still a positive result for the big miner and each operation had an All-In Sustaining Cost below the company’s average realised gold price for the quarter of $1,450 per ounce.

Other gold miners including Silver Lake Resources Limited (ASX: SLR) and Evolution Resources Limited (ASX: EVO) also saw a trend of slight cost rises in the quarter. For many of the miners this can be attributed to costs being spread over lower production for the quarter and the impact of factors like maintenance and seasonal rainfalls which impacted production and pushed costs higher.

Company

All-in sustaining costs per oz, December Qtr

 

All-in sustaining costs per oz, March Qtr

Change (%)

Newcrest Mining Limited (NCM)

$921

$988

+7.3%

Silver Lake Resources (SLR)

$1,159¹

$1,266¹

+9.2%

Evolution Mining (EVO)

$1,053

$1,079

+2.5%

Beadell Resources (BDR)

Not reported

$937

N/A

Source: company releases Notes: ¹Mount Monger Operations only.

Costs at Silver Lake Resources’ Mount Monger Operations increased slightly, mostly because of the impact of ore stock movements, which is basically a non-cash charge for processing stock-piled ore. However the high costs of production at the company’s Murchison Gold Operations was recorded at more than $2,000 per ounce, an obvious catalyst for placing the mine in care and maintenance.

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. Beadell Resources 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.

Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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