Gold mining companies still hesitant to increase production
Despite of the recent surge in prices, many miners still prefer to wait with increasing their production.
The world's leading gold mines are declining after Covid-19-related shutdowns despite record prices for the yellow metal, with cost-conscious executives prioritizing investor returns over production growth. Gold Prices have soared 30 percent to about $ 2,000 an ounce this year as central banks took measures to stimulate dial-up in response to the coronavirus pandemic. This has resulted in a cash boost for miners, with top and mid-range producers holding around $ 5 billion in cash as of June 30, according to Scotiabank estimates. However, interviews with executives, analysts and fund managers reveal that miners are reluctant to spend money on expensive projects and to tap into marginal deposits that require significant capital and years to break even. Seven out of ten of the global gold mines, including Newmont, the world's largest gold mine, Barrick Canada and Gold Fields in South Africa, cut their planned production by 7% for the year, citing coronavirus-related closures, as reported is apparent from the approval applications. The caution is a reversal of the 2011 Gold Price boom that caused buyers to overspend on acquisitions and billions in depreciation as prices plummeted in subsequent years. Companies that have won back investor favor are afraid of making similar mistakes. "The real trap in the gold industry in the past has been volume hunting," Newmont chief executive officer Tom Palmer told Reuters. Newmont's budget this year is $ 1.3 billion, roughly half the previous cycle's level. Gold Fields said that despite the higher price, there is no rush to change the cutoff grade, the minimum grade that can be economically mined. "It's not easy to just turn the ship in another direction," Gold Fields CEO Nick Holland told Reuters, referring to the increase in production from the higher price. Barrick's long-term price assumption remains unchanged at $ 1,200, underpinning a growing dividend and deleveraging, said CEO Mark Bristow. "Nobody made real money in the last cycle," he said at the Mines and Money Online Connect virtual conference last week.