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What Did It Cost Gold Miners to Dig Out an Ounce of Gold?

Anuradha Garg - Author
By

Nov. 27 2018, Updated 10:30 a.m. ET

All-in sustaining costs and gold miners

AISC (all-in sustaining costs) is an encompassing measure that helps us compare gold miners’ performances. It shows a company’s margin cushion at prevailing gold prices (GLD) (IAU).

Barrick Gold (ABX) reported AISC of $785 per ounce and a cost of sales of $850 per ounce in the third quarter. Its AISC were 1.7% higher YoY (year-over-year) due to a lower number of ounces sold, and its costs improved 8.3% sequentially.

Its costs in the third quarter were in line with its guidance. Barrick Gold maintained its AISC guidance for 2018 at $765–$815 per ounce. Due to ABX’s merger with Randgold Resources (GOLD), its costs per unit are expected to fall further.

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GG and NEM

Goldcorp (GG) achieved AISC of $999.00 per ounce in the third quarter, which was 20.8% higher YoY and 17.5% higher sequentially. Its AISC was higher than expected due to the lower production of gold. Along with lowering its production guidance, Goldcorp increased its cost guidance. Compared to its original AISC guidance of $800.00 per ounce (plus or minus 5.0%), Goldcorp increased it to $850.00 per ounce. It’s vital for the company to come in either at or lower than its AISC production guidance in the fourth quarter to restore investors’ confidence in its execution of these plans.

Newmont Mining’s (NEM) AISC were $927 per ounce, implying a fall of 1% compared to the same quarter last year. While Newmont’s costs fell during the third quarter, its overall unit costs in 2018 are on the rise, mainly due to the company’s planned stripping campaigns. The company sees its costs coming down again in 2019 as it brings its new low-cost mines online.

Along with its production guidance, NEM also narrowed and lowered its cost guidance to $950–$990 per ounce from its previous guidance of $965–$1,025 per ounce. This expected improvement has been driven by continued outperformance at Boddington, Akyem, and other sites across NEM’s portfolio.

Kinross Gold’s costs improved

Kinross Gold (KGC) reported AISC of $1,049 per ounce in the third quarter, reflecting rises of 12% YoY (year-over-year) and 3% sequentially. Kinross Gold has maintained its AISC guidance of $975 per ounce plus or minus 5% for 2018, which is largely in line with its 2017 AISC per ounce. Going forward, the company could lower its unit costs even more. However, if the Tasiast expansion remains on hold for too long, investors’ sentiments could sour.

As we’ve seen, Barrick Gold’s costs are rising, but it’s still in the first quarter of the industry’s cost curve and is among the lowest-cost gold producers. For any given price of gold, it could make the most money if other factors remain constant. AISC, for example, doesn’t include growth capex.

In the next article, we’ll look at these companies’ financial leverages.

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