As the price for gold continues to tumble lower (currently teetering at US$1,171 per ounce), now more than ever investors should be seeking only the lowest cost producers.
Low cost gold miners make the best candidates for investment because they are better sheltered from further gold price falls, produce higher margins and have a better chance of covering their debt obligations.
And the winners are…
Gold miner costs can be compared using All-In Sustaining Cost (AISC) per ounce. For the most recent September quarter the top three ASX-listed low cost gold producers are (drum roll please!):
1. Newcrest Mining Limited (ASX: NCM);
2. Northern Star Resources Limited (ASX: NST); and
3. Evolution Mining (EVOLUTION FPO) (ASX: EVN)
| Company | AISC June Q 2014 | ASIC Sep Q 2014 | % Change | Average gold price received |
| Newcrest Mining Limited (ASX: NCM) | $913 | $864 | -5% | $1,393 |
| Northern Star Resources Limited (ASX: NST) | $1,032 | $1,043 | 1% | $1,399 |
| Evolution Mining Limited (ASX: EVN) | $1,057 | $1,083 | 2% | $1,431 |
| Kingsgate Consolidated Limited (ASX: KCN)¹ | $1,101 | $1,252 | 14% | $1,487 |
| Beadell Resources Limited (ASX: BDR)¹ | $1,273 | $1,307 | 3% | $1,445 |
| Silver Lake Resources Limited (ASX: SLR)² | $1,397 | $1,383 | -1% | $1,472 |
Source: Company quarterly updates.
Notes: ¹reported in USD, converted to AUD; ²SLR Mount Monger Operations only – accounts for 94.1% of production
Newcrest Mining retained the crown over the other key gold miners in September, while shaving off an additional 5% from its already low AISC, to just $864 per ounce. This is 17% lower than runner up Northern Star Resources and a massive 37% lower than Silver Lake Resources Limited.
It has been a painful 18 months of change for Newcrest Mining, but the company has smartly leveraged economies of scale to keep costs down and keep production up.
Almost all the companies listed kept a tight lid on costs compared to the prior June quarter, which suggests companies may be reaching the limit of potential cost reductions. This could become a significant problem if the price of gold falls further.
The one exception was Kingsgate Consolidated Limited (ASX: KCN) which saw costs rise 14% over the June quarter. The company noted that costs were in line with expectations, but that going forward it will continue to pursue "operating efficiency and cost saving initiatives".
