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Can Newmont Mining Match Barrick Gold’s Low Costs?

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Barrick Gold: Low-cost producer

Barrick Gold (ABX) is among the lowest-cost producers in the industry. However, its unit costs have started creeping up. Barrick Gold reported AISC (all-in sustaining costs) of $750.00 per ounce, an increase of 3.0% year-over-year (or YoY) in 2017. Newmont Mining (NEM) reported AISC of $924.00 per ounce, which is 1.0% higher than in 2016.

Barrick Gold is still the lowest-cost senior gold producer, with costs lower than major peers (RING) Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Kinross Gold (KGC).

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Progression of cost profiles

Barrick Gold increased its AISC guidance for 2018 to $765.00–$815.00 per ounce. A year earlier, the company expected these costs to be $710.00–$770.00 per ounce.

Newmont Mining also increased its cost guidance for 2018 to $965.00–$1,025.00 per ounce from $950.00–$1,000 per ounce in 2017. The guidance for 2018 is 7.7% higher at the midpoint than the actual AISC in 2017. NEM sees its costs coming down again in 2019 as it brings its new low-cost mine, Subika Underground, online.

Difference to persist

Newmont Mining expects its newest projects to add production at AISC of just $750.00 per ounce for the first five years. This new production is expected to replace the maturing production and add additional low-cost production, which could help the company’s overall cost profile.

While Newmont Mining’s unit cost profile is expected to decline over the coming years while Barrick Gold’s unit cost profile might creep up. Barrick Gold is still expected to be a lower-cost producer than Newmont Mining for the foreseeable future.

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