Gold miners face new challenge in plummeting gold price

Mon Apr 15, 2013 2:54pm EDT
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* Gold equities slide as spot gold drops below $1,400/ounce

* Gold miners already grappling with rising costs

* Producers with fewer projects, higher costs at particular risk

* Price drop could hit price-linked dividends

By Allison Martell and Euan Rocha

TORONTO, April 15 (Reuters) - A steep drop in the price of gold will hit profits at mining companies that are already straining under rising costs, and could prompt some miners to rethink their capital spending.

Gold companies big and small sold off on Monday as the prospect of central bank gold sales and fears that the U.S. might reduce monetary stimulus tipped spot gold prices off a ledge, to below $1,400 per ounce.

While lower prices are not likely to wipe out the miners' profits, they will squeeze cash flows as companies are still feeling the impact of pricey acquisitions made at the height of the commodity cycle.

"Everybody was enjoying the high tide, and now that the tide is coming down you're seeing who's swimming naked, and the thing is, everybody's swimming naked," said Veritas Investment Research analyst Pawel Rajszel, who is broadly negative on the sector.   Continued...