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Can Goldcorp Catch Barrick’s Unit Costs through Its New Vision?

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All-in sustaining costs and gold miners

AISC (all-in sustaining costs) are an encompassing measure that helps compare miners’ performance—a vital metric for investors. They show the company’s margin cushion at prevailing gold prices (GLD) (IAU).

Barrick Gold (ABX) reported AISC of $756 per ounce in 4Q17, 3.3% higher YoY (year-over-year) and 2.1% lower sequentially. Its full-year AISC also rose ~3% YoY to $750 per ounce. The company attributed the cost increase to a planned increase in mine-site sustaining capital expenditure. Barrick Gold increased its AISC guidance for 2018 to $765–$815 per ounce. A year earlier, the company was expecting these costs to come in between $710 and $770 per ounce.

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GG and NEM: AISC

Goldcorp (GG) achieved AISC of $870 per ounce in 4Q17, 16.5% higher YoY and 5.2% higher sequentially. Higher unit costs in the quarter were due to lower gold sales, higher sustaining capital, and higher corporate administration costs. In 2017, GG’s AISC came in at $824 per ounce, an improvement of 3.7% YoY. By 2021, it expects to achieve AISC of $700 per ounce.

Newmont Mining’s (NEM) AISC came in at $968 per ounce in 4Q17, 5.4% higher YoY and 2.7% higher sequentially. The increase in unit costs was mainly the result of higher mill maintenance costs at Boddington and higher sustaining capital expenditure. Its total 2017 AISC came in at $924 per ounce, 1% higher than 2016. Newmont increased its cost guidance for 2018 to $965–$1,025 per ounce from $950–$1,000 per ounce in 2017. The company sees its costs coming down again in 2019 as it brings its new low-cost mine, Subika Underground, online.

Still on the high side

Kinross Gold (KGC) reported AISC of $1,019 per ounce in 4Q17 compared to $1,012 per ounce in 4Q16. For 2017 as a whole, the company reported AISC of $954 per gold equivalent ounce (or GEO), 3% lower than its AISC in 2016. Kinross Gold is guiding for AISC of $975 per ounce for 2018 with a variance of plus or minus 5%, in line with its 2017 AISC per ounce. Lower production is one the variables keeping KGC’s unit costs almost flat for 2018. Going forward, new projects could help increase its production, which could also help it reduce its overall unit costs.

In the next part of this series, we’ll look at these companies’ financial leverages.

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