August 6, 2009 / 7:45 PM / in 9 years

WRAPUP 1-Gold miners benefit from lower costs, shares gain

* Lower costs boost quarterly results of gold miners

* Shares of Gold Fields, Iamgold, Alamos & New Gold climb (Wraps Gold Fields, Iamgold, Alamos and New Gold results; All figures in U.S. dollars, unless noted)

By Euan Rocha

TORONTO, Aug 6 (Reuters) - South Africa’s Gold Fields (GFIJ.J) and three smaller Canadian rivals said lower costs helped boost their quarterly results, sending shares of all four precious metal mining companies higher on Thursday.

The gold miners, — Gold Fields, Iamgold Corp (IMG.TO), Alamos Gold (AGI.TO) and New Gold Inc (NGD.TO) — provided mixed outlook on gold production and anticipated production costs.

Gold Fields, the world’s No. 4 gold producer, expects costs to rise 15 percent in the near term, on the back of a new pay deal for workers, higher electricity tariffs and a stronger rand/dollar exchange rate. It also said production would remain below its long-term target. [ID:nL684662]

But Iamgold and Alamos were more optimistic and forecast an increase in near-term gold output, along with a decline in production costs. New Gold reiterated its prior production and cost outlook. [ID:nN06275556] [ID:nN06320151] [ID:nBNG431931]

Last week, Barrick Gold Corp (ABX.TO), the world’s largest gold producer, posted stronger-than-expected quarterly earnings, while forecasting lower mining costs in the quarters ahead. [ID:nN30335550]

Although the price of gold has remained at near-record highs since peaking in 2008, high raw material prices and tight labor markets in 2008 pushed up production costs, holding back profits at gold producers.

But the benefits of lower input prices, cheaper drilling costs and looser labor markets have begun to filter down to gold miners and are expected to help the companies boost profits on the back of high gold prices.

Monetary easing by global central banks, combined with inflationary concerns and more optimistic economic sentiment, have buoyed the price of gold this year.

Spot gold XAU= was at $964 an ounce, in afternoon trade, up slightly from $961 an ounce on Wednesday and up about 10 percent since the beginning of the year.


Gold Fields and Iamgold both announced significant debt reductions in the quarter.

The South African miner said it lowered its net debt to 6.09 billion rand ($753 million), from 7.75 billion rand, in the quarter ended March 2009.

Since the end of 2008, Iamgold’s long-term debt is down almost 20 percent to $45.7 million.

Alamos said it continues to strengthen its financial position. It remains debt-free with over $140 million in cash and short term investments.

New Gold said its overall debt position is $272.1 million. The debt is comprised of $160.9 million in senior secured notes, $47.3 million in convertible debentures and $63.9 in project financing for its Mesquite mine — the majority of this debt is not due until 2017.

New Gold held cash and cash equivalents of $141.1 million as at June 30, 2009.

Shares of Gold Fields in afternoon trade were up 5 cents at $12.58 on the New York Stock Exchange, while those of Iamgold rose 43 cents to $11.25.

Alamos Gold’s shares rose 20 Canadian cents to C$10.14 on the Toronto Stock Exchange, while those of New Gold were up 25 Canadian cents at C$3.53. ($1= 8.09 rand) ($1= $1.08 Canadian) (Reporting by Euan Rocha; Editing by Frank McGurty)

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