Does Gold Miners’ Declining Production Herald Tighter Supply?



Production decline

Goldcorp (GG) produced 571,000 ounces of gold in the second quarter, a fall of ~10.0% YoY (year-over-year). The fall in production was expected, as its Peñasquito mine entered a planned stripping phase, which resulted in lower-grade ore. The divestitures and closures of some of the company’s mines also led to this decline in production.

The company reiterated its 2018 production guidance of 2.5 million ounces plus or minus 5%.

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Barrick Gold’s eighth decline in production

Barrick Gold (ABX) produced ~1.07 million ounces of gold in the second quarter, reflecting a fall of ~25.0% YoY. Part of Barrick Gold’s lower production was expected due to lower ore grades, recovery at the Barrick Nevada oxide mill, and scheduled maintenance shutdowns at the Barrick Nevada and Pueblo Viejo autoclaves.

Barrick maintained its production guidance of 4.5 million–5 million ounces of gold in 2018, implying a decline of ~11% compared to 2017 as measured at the midpoint. The fall will mark the company’s eighth consecutive annual decline in production.

NEM and KGC: Production declined

Like GG and ABX, Newmont Mining’s (NEM) production declined 14% YoY to 1.16 million ounces during the second quarter. Its production declined mainly due to lower ore grades at Carlin, Twin Creeks, Boddington, and Akyem and the buildup in Cripple Creek & Victor’s concentrate inventory. NEM maintained its gold production guidance of 4.9 million–5.4 million ounces for 2018.

Kinross Gold (KGC) produced 602,000 gold equivalent ounces in the second quarter, a 13% fall YoY. Its second-quarter production fell YoY mainly due to lower grades at several of its mines and its completion of activities at Kettle River-Buckhorn in the second quarter of 2017. For 2018, Kinross reiterated its production guidance of 2.5 million ounces plus or minus 5%.

The productions of all these miners (GDX) have declined, and they’ve all reiterated their production guidances. Note that most of these production guidances imply YoY falls. While some miners have strong production pipelines, their guidances don’t suggest very solid production growth in the long term, which could mean an overall fall in the supply of gold.

Next, let’s take a look at these miners’ medium- to long-term production growth expectations.


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