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Gold Margins Rise On Lower Costs, Steady Production

Gold spent the second quarter of 2017 fluctuating between US$1,200/oz and US$1,300/oz. It ended the quarter on the down cycle of its 2017 run, but by late July it was moving back up and is likely to spend most of the year in that range. Within its cycling, the price is nevertheless inching higher; it seems likely to close the year between US$1,260/oz and US$1,275/oz.

On the mining side, second-quarter gold production held steady quarter-on-quarter at about 23.9 million ounces, essentially flat over the second quarter of 2016. Gold producers have gone to great lengths to drive their costs lower, and it has been paying off. Weighted-average all-in sustaining costs, or AISC, fell about 7% in the June quarter to US$845/oz, from US$910/oz in the year-ago period.

Mined gold production by quarter

Weighted average head grades at primary gold mines by quarter

The gold price is averaging slightly lower this year at US$1,260/oz, compared with US$1,276/oz in 2016, but this level is yielding far better margins. The margin between AISC and the gold price has improved 13% over 2016.

Production increases are generally outweighing decreases at mines globally, with many operations benefiting from higher gold grades in processed ore.

Biggest YOY production changes (as reported)

A recent article highlighted the trends in capital intensity of new gold mines that opened since 2013, plus those expected to start up through 2020. Capital intensity peaked in 2015 at US$3,676/oz of gold equivalent, but has been falling in the years since and is expected to hit a low of US$1,501/oz of gold equivalent in 2018.

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Among new mines, Pretium Resources Inc. commissioned its Brucejack mine in British Columbia in late June. Two more are nearing production and expected to come online in the September quarter, while another eight are expected to commission before year-end.

Mines due to open in next 12 months

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Aug 30, 2017
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