4 Major Gold Mining Companies Achieved 4% Growth in Q3
Total production of gold or Gold Equivalent Ounces (GEO) depending on what the company reports increased by 4% over Q3 2012. Each of the 4 major gold miners on my watch list is well on track to meet production estimates for 2013 that were communicated in mid-2013. Yamana recently started production at a new mine that will add to growth in Q4. Earnings from Operations at each of the 4 were in the black. The average realized gold sales price during Q3 was about $1,330.
No-Growth Miners Generating Cash
Barrick (ABX) and Newmont (NEM) have poor growth prospects. Free cash flow for ABX and NEM was positive in Q3 due capital spending reductions. Goldcorp (GG) and Yamana (AUY) continue to invest in growth and reported negative free cash flow. Free cash flow is Net Cash Flow From Operations less Capital Expenditures.
All In Sustaining Cost (AISC) Reduced to $936/ounce
The weighted average AISC for these four miners in Q3 was $936 per ounce, down from $1,043 per ounce in Q2. AISC is a new industry (not GAAP) metric. AISC includes by-product credits and sustaining capital. It excludes new project and exploration capital and expenses. More detail is available via the World Gold Council: http://www.gold.org/media/press_releases/archive/2013/06/guidance_note_on_non_gaap_metrics_pr/
Industry Viable When Gold >$1,300
Q3 financial results show that these miners are viable when gold sales prices are $1,300 per ounce. In Q3 gold sales averaged about $1,330 and the miners generated free cash flow while spending enough capital to grow production. The miners could respond to lower gold prices by reducing capital expenditures even further as evidenced by their reported AISC. Less capital spending would come at the expense of future production. If miners get really desperate they can high-grade or produce at only higher grade deposits, which would lower total gold production.