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Australia’s largest gold producers have doubled in the past year

As the spot gold price has soared, so too have Australia’s gold miners.

Since July 6, 2015, Newcrest Mining Limited (ASX: NCM), Evolution FPO (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) have seen their share prices rise 99.6%, 122% and 142% respectively.

They aren’t the only ones of course. Several smaller miners have seen their share prices rocket…

Dacian Gold Ltd (ASX: DCN) is up 637%, St Barbara Ltd (ASX: SBM) is up 500%, while Resolute Mining Limited (ASX: RSG) and Silver Lake Resources Limited (ASX: SLR) are up 408% and 314% respectively. Plenty of other ASX-listed gold miners have also seen their share prices more than double.

What’s driving the gold price

A year ago the spot gold price was trading around US$1,150 an ounce. Overnight it closed at US$1,341.90 as increased uncertainty abounds in global markets. Brexit, continuing European dramas, the upcoming US election, interest rate changes by the US Federal Reserve and a slowing Chinese economy have all been major worries for investors over the past year.

Spot gold price Jul 2016

Source: Kitco

 

Additionally, the Australian dollar plunged below US 70 cents in early January 2016, and is currently trading at around the same level as it was a year ago – ~US 75 cents.

Lower costs and higher production

The gold miners have also been forced to slash their production costs.

Newcrest says its group all-in sustaining cost (AISC) in the last six months of 2015 was US$837 an ounce (including US$178 an ounce in by-product revenues – mainly copper), compared to US$914 an ounce in the six months to end of December 2014. The miner is expecting to produce between 2.4 and 2.6 million ounces of gold this financial year.

Evolution says it is expecting to produce 800,000 ounces of gold at an all-in cost of A$1,125 an ounce in the 2016 financial year (FY16), generating $405 million in net cash flow. Production is forecast to increase again in FY17 up to a potential 860,000 ounces, with AISC between A$985 and $1,045 an ounce.

Northern Star expects to produce 570,000 ounces of gold at an AISC of A$1,050 an ounce this financial year. Production in FY18 is expected to reach 700,000 ounces.

Foolish takeaway

The gold miners should post strong results when they report their FY2016 results in August – with shareholders likely to be rewarded by at least the big three with rising dividends.

However, where the gold price goes will be the major factor that will determine the miners’ earnings in future as well as their share prices, and investors need to be mindful of that.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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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