6 low cost gold miners earning huge margins

Where do Newcrest Mining Limited (ASX:NCM) and Northern Star Resources Ltd (ASX:NST) rank?

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It’s very good to be an Australian gold producer todayaccording to EVOLUTION FPO’s (ASX: EVN) executive chairman Jake Klein. How good? Well let’s take a look.

Data from the most recent quarterly reports (three months to March 2015) gives valuable insight into the current margins of the top ASX-listed gold miners.

Margins in this case are the difference between All-In Sustaining Costs (AISC) per ounce of gold and the average price received per ounce, so the bigger the better. All-In Sustaining Costs include cash production costs and royalties, but also company over-heads which I believe gives a more level comparison between companies.

The good:

As we can see from the table below, when it comes to low costs St Barbara Ltd (ASX: SBM) and Resolute Mining Limited (ASX: RSG) lead the charge with huge margins of 89% and 68% respectively, closely followed by Newcrest Mining Limited (ASX: NCM) and Evolution FPO (ASX: EVN).

Gold Miner AISC per oz (March Qtr) Avg realised gold price per oz (March Qtr) AISC Margin (%)
St Barbara Ltd (ASX: SBM)

$798

$1,511 89%
Resolute Mining Limited (ASX: RSG)

$918

$1,540

68%

Newcrest Mining Limited (ASX: NCM) $946 $1,556 64%
Evolution FPO (ASX: EVN) $1,024 $1,562 53%
Northern Star Resources Ltd (ASX: NST) $1,172 $1,500 28%
Silver Lake Resources Limited (ASX: SLR)¹ $1,265 $1,519 20%
Kingsgate Consolidated Limited (ASX: KCN)²

$1,399

$1,484

6%

Beadell Resources Ltd (ASX: BDR)³ $1,403 $1,590

13%

Source: Company releases.

Notes: ¹SLR Mount Monger operations only. ²KCN converted from USD at A$/US$ 0.79. ³BDR converted from USD at A$/US$ 0.77.

Newcrest Mining investors will be especially pleased. The huge 64% margin, combined with strong production, is delivering significant free-cash flows which are reportedly being used to pay down the company’s debt and reduce gearing.

The bad:

On the other end of the spectrum Kingsgate Consolidated Limited (ASX: KCN) and Beadell Resources Ltd (ASX: BDR) scraped by with relatively thin margins.

Kingsgate’s costs suffered from lower production after a 44-day shutdown of its Thailand based Chatree processing plant; the result of a temporary suspension order from the country’s Department of Primary Industry and Mining.

Meanwhile Beadell, which was one of the lowest cost producers for the December quarter, was hurt by falling iron ore prices. As a by-product of gold production iron ore can be credited towards All-In Sustaining Costs, bringing the number down.

Beadell did note that it had slimmed down its workforce by 20%, which will lower costs going forward.

Will the good times continue?

Heading into the June quarter gold miners are set to continue to benefit from lower diesel prices and a growing supply of labour as iron ore slumps.

The price of gold is harder to predict. Although it has been stabilising recently, strong financial markets and low inflation continue to suppress the traditional drivers of demand.

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Motley Fool contributor Regan Pearson has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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