RPT-Miners may take more hits from weak gold prices after Newcrest

Mon Jun 10, 2013 5:21pm EDT
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SYDNEY/TORONTO, June 10 (Reuters) - The pain is not likely to be over for investors in mining shares after the steepest drop in gold prices in a generation led to a $6 billion asset writedown at Australia's Newcrest Mining, fuelling speculation of more to come.

A $200 plunge in prices in two days in April heightened fears that gold's 12-year rally may have topped out.

For nearly a month the price has languished around 1,400 an ounce, which could force more miners to write down the value of their reserves - calculated based on a higher price - and eroding the value of projects, some of which may no longer be profitable.

Gold miners were already struggling with the impact of soaring costs, including higher wages for workers and fuel prices, which have reduced margins and eaten into cash generation.

"We certainly expect we will see further writedowns from other producers as we ... get closer to reporting season. It could be a trend," said David Lennox, an analyst at Fat Prophets.

Newcrest, Australia's biggest gold miner, said on Friday it would write down the value of mines in Australia, Papua New Guinea and Africa.

That turned the spotlight to miners such as African Barrick Gold, owned by major Barrick Gold, and Newmont Mining Corp, which use prices near or above current spot levels to value reserves.

"I'm sure we'll see more such actions in the industry," Gordon Galt of Taurus Funds Management Pty Ltd said.   Continued...