ANALYSIS

January–June production and financial results

The recent publications of half-year results by the largest gold mining companies demonstrated that the wave of multibillion write-offs was completed in 2013 and the companies’ efforts in optimizing production and costs became fruitful.

Despite the 15% decrease in average realized gold prices to U.S. $1,290 per ounces, Newmont, AngloGold Ashanti and Goldcorp increased EBITDA. The second interesting result is that the decrease in realized prices did not lead to massive production cuts. Only Barrick Gold demonstrated reduction in the period.

Production, in thousand ounces:

Russian companies have not yet released their consolidated financial statements for the first half of the year, but the production results already demonstrate growth:

Polyus Gold increased output by 4% to 745,200 ounces; Polymetal by 24% to 386,000 ounces;

Petropavlovsk raised gold output by 4% to 306,400 ounces; and Nordgold increased production by 14% to 476,100 ounces.

All-in sustaining costs (AISC) also continue decreasing. AISC comprise total cash costs, as well as administrative, exploration, sustaining and development expenditures.

AISC dynamics, in USD per ounce:

Previously, the company were trying to save money by reducing capital expenditures. The results of the second quarter showed that the companies demonstrated operational efficiency.

Newmont cut AISC in the first quarter by means of reducing the sustaining, exploration and development expenditures, but in the second quarter, the company increased production and decreased AISC in Australia, New Zealand and Indonesia.

In the first quarter, the company reduced AISC by $87 to $1,034 per ounce, including $73 from sustaining and development spending cuts. In the second quarter, AISC decreased by $220, including $62 from capex cuts and $152 from operational spending.

AngloGold managed to decrease operational spending mainly after weakening of local currencies against the USD.

Production growth and reduction of operations spending allowed the companies to increase adjusted EBITDA.

At the same time, the bulk of reductions still fall on capital expenditures. The companies are not ready to launch large-scale investment projects. Regretfully, this source of saving is not a long-term.

Potentially, the current measures of reducing the capital expenditures may turn big spending in future on the same purposes, while exploration cuts may turn decrease in mining volumes and reserves.

Capital spending, in million USD:

End

12.08.2014 13:17