The ASX has a new low-cost gold mining king!
Beadell Resources Ltd (ASX: BDR) has stolen the low-cost crown from Australia’s largest listed gold producer Newcrest Mining Limited (ASX: NCM) for the most recent December quarter. Beadell reported All-In Sustaining Costs (AISCs) per ounce of just $816 (US$638), 15% lower than the next low-cost producer Newcrest Mining and a massive 38% lower than Beadell’s own previous September quarter.
All-In Sustaining Costs (AISC) are a valuable, non-accounting, measure which factor in not only the cash cost of production, but royalties and company overheads which can vary significantly between miners.
The secret to Beadell’s success was a massive 75% increase in production and the depreciation of the Brazilian real against the U.S. dollar in the last six months of 2014.
Rounding out the top three low-cost ASX gold producers was EVOLUTION FPO (ASX: EVN) with AISCs of just $990 per ounce, a solid 9% reduction on the September quarter.
|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|
|Evolution Mining Limited (ASX: EVN)||$990||-9%||$1,428|
|Kingsgate Consolidated Limited (ASX: KCN)¹||$1,021||-18%||$1,347|
|St Barbara Ltd (ASX: SBM)||$1,042||-22%||$1,423|
|Northern Star Resources Limited (ASX: NST)||$1,073||3%||$1,417|
|Doray Minerals Limited (ASX: DRM)||$1,110||-20%||$1,450|
|Resolute Mining Limited (ASX: RSG)||$1,150||-18%||$1,410|
|Silver Lake Resources Limited (ASX: SLR)||$1,400||1%||$1,460|
Source: Company quarterly updates. Notes: ¹reported in USD, converted to AUD;
Of the nine major ASX listed gold miners compared, all reported costs below the average (production weighted) price of gold received at $1,409 per ounce.
However it was a close call for Silver Lake Resources Limited (ASX: SLR). The miner has battled against high costs in the last 12 months and produced a theoretical gross margin of just 4%. This compares to the massive 72% margin pulled off by Beadell Resources and Newcrest Mining’s 45.6%.
One other standout for the quarter was Kingsgate Consolidated Limited (ASX: KCN), which reduced costs by 18% over the September quarter and had one of the highest average realised gold prices at $1,487 per ounce. The company noted that costs were helped by a 15% increase in production and “continued implementation of cost improvement initiatives”.
What it means for investors
The results are hugely positive for gold investors. After more than a year of relentless cost reduction slimmed down gold miners are now primed to take advantage of any upswing in gold price, supported by the lower Aussie dollar.
If you’re considering adding a small exposure to your portfolio, reduce your risk by focusing on gold producers with high reserves near the top of the low-cost table above. These companies will benefit most from economies of scale long term and are most likely to sustain their low cost base.
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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned.
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