Arguably ABX is the best mining operator in the world over the last decade, and certainly the low cost producer among the majors. It's been a great gold bear market stock. My problem with ABX relates more to my points in post 48207. I am not going to go head to head with you on a debate about the quality of their mining assets.
As far as your points about lots of low cost reserves for miners in general, as I stated before, it's pretty much in the hands of the companies you've already mentioned. As you said, "I feel sorry for small high cost producers".
Unfortunately those producers still mine a lot of unprofitable gold (on a full production cost basis). Indeed the stats I've seen suggest that 70% of the world's production is unprofitable below $300 on a full cost (cash, capital and exploration costs) basis. In fact several of your larger one million plus producers are real border line: ANGLY 6.9 mil oz at 229 cash cost,presume close to 300 full. ASL 1.6 mil oz at 211 cash, 300 full, Kinross 1.0 mil @ 300 full, Harmony 1.0 mil oz @ 232 cash, over 300 full.
On your point about who has cash costs of 250-275, I took a look at the Goldsheets spreadsheets and there are numerous names at 225-250 You are correct that there are only a few over 250. But, that still doesn't rebut my overall point.
Finally your counterpoint about ABX only hedging 25% of their reserves. I find that extraordinarily high, especially considering it will take four years to deliver at their production rate. And then they throw in a bunch of naked calls to boot.
I would also remind readers as to the source (Peru) of one of the low cost mines (Pierna) you spoke of. I was in Peru two years ago and they have a military guard on every street corner in the country. Although the country is no longer in turmoil, it's not Nevada either. I can tell you one thing as an analogy, when I was a kid growing up in Kansas those conservative farmers wouldn't have sold four years of wheat before they had it. And they certainly wouldn't have written naked calls. Does it really make sense for Peruvian gold? Apparently so, in the "new era".
By the way, I appreciate the debate. |
