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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: goldsheet who wrote (63269)	2/3/2001 3:34:22 PM
From: russwinter	Read Replies (1) \| Respond to of 116764

Anglo would be a prime example of what I'm talking about on the production question. They report that they have five "poorly performing" SA mines. They also have Matjhabeng, described as winding down (368K) production. I wouldn't exactly call Jerritt Canyon (320K @ 243 cash cost) a winner either. Incredibly these poor performers constitute 3,440,000 oz, or 48% of their 7 1/4 million total and about 4.2% of world wide production. So what's happening? Apparently Great Noligwa(971K) and Tau Tona (600K) limp along surviving on old heroin fixes (translate old higher price hedges). Junk like Elandstrand and Deelkraal gets sold and recycled for HGMCY to try and bleed a little more out of. In this last quarter they pretty much admitted that Joel (210K) and Bambanani (441K) need to be "rationalized". Does that mean closed, or "sold" to Anglo wannabees? And the hedge book? Kind of grist for currency speculation more than anything and loaded to bear with every exotic derivitive imaginable. This one's sort of wired and glued together, strutting around calling itself a gold company. It is one of my "Great Turd" candidates. Their clueless counterparties will deserve what they get.

To: goldsheet who wrote (63269)	2/4/2001 12:40:51 AM
From: russwinter	Respond to of 116764

AU has a delivery price in 2001 of about $300 for 4.8 million oz, so roughly 2.5 million of their production will be sold at spot. That suggests that the poor performing mines are breaking even at best on a cash cost basis as they do not have the heroin fix of high hedged prices. Next year it gets worse as only about 3.0 million is delivered at 317. 4 1/4 million oz gets delivered at spot. If they hedged next year's production now the contango is only worth 4% above spot in US or AUS and they would be capped from any gains in POG. Although AU picks up new production from Geita and Yatela, the nearly 3.1 million from the mines mentioned in post 63272 are candidates for closure if POG stays below 275. Message 15293915 It will be nearly impossible for AU to maintain current production levels at these depressed prices without incurring losses. Would look for closures of Joel (210K), Bambanoni (441K), and Matjhaleng (368K) soon. They may wait awhile longer on the others in hopes of higher prices, but they have no margin for error. New production is coming from buying into existing projects, and that just subtracts from someone else's column.

To: goldsheet who wrote (63269)	2/4/2001 10:07:12 AM
From: russwinter	Read Replies (2) \| Respond to of 116764

PDG liquidates capital and wakes up in hedging detox: Roughly 2/3 (1,875,000 oz.)of PDG production (2.9 million)comes from seven mines with cash costs well over $200. They are Dome 312K @ $202, La Coipa 220K @$212, Bald Mt 140K @ $223, South Deep 160K @ $204, Misima 245K @ $208, Kidston 230K @ $218, Granny Smith 265K @ $206. A careful scrutiny of the detailed quarterly makes for interesting reading. They repeatedly make references to "lower grades", and "change in ore bodies" at these mines. Even a lower cost mine like Campbell has operational difficulties. It is clear that costs as a rule are on the rise at these sources and that sweet spots are fewer and further between. sedar.com They have also worked through their higher return hedges in the last couple years and now face a dry well. Forward contracts for 2001 are deliverable at only $275 and they have a 1,156,000 oz obligation. In 2002 they have 709,000 hedged at $296. In 2003 and beyond they have nominal ounces locked in. They have some way out of the money calls written that have little premium left today. That means that 68% or 4 million oz of their 2001-02 production will be sold a spot prices or if hedged now at tiny contangoes. Selling gold at 265 spot that costs 200-225 to produce does not take into account replacement costs. They may have reserves, but the math is simple. If you get 265 and it costs 205 cash costs plus 8 reclamation, and 25-30 to replace, you have a whopping $25 profit AND NO ROOM FOR ERROR (remember this is mining, not discount retailing). And return on capex? Forget that. They would be wise to mothball these mines for better days. And I predict that they will if even the slightest problems materialize. Bob, so far just with AU and PDG I'm seeing about half their production (5 million oz.) vulnerable to continued weakness in POG or the slightest difficulties.

To: goldsheet who wrote (63269)	2/4/2001 11:25:30 AM
From: russwinter	Read Replies (1) \| Respond to of 116764

Homestake's Aussie production is questionable: Plutonic 240K @ 188-214, Lawler 100K @ $227, Kalgoorlie 370K @ $200ish Close read of third quarter is another broken record: Kalgoorlie, lower grades and higher sulfer content (translate environmental costs). Plutonic ditto on grades. HM does not have higher priced hedges to help, and in fact has shelled out capital for put protection below 265. They have kept cash costs in line (and this is key) because of the LOWER AUSSIE $ in the third quarter. They should still be OK there in the fourth. However, into the new year the story has changed as the Aussie has reversed to the 55 cent area. Another 5 or 10% advance against the US will put HM's 710K there in the crapper. Conclusion: US Dollar addiction. NO ROOM FOR ERROR: customcharts.com Round Mountain's 616K ($228 cash cost/ first three quarters) is another question mark. Quote from report: "costs increased due to lower ore grades and recovery rates". Do I detect a trend?

To: goldsheet who wrote (63269)	2/4/2001 1:22:49 PM
From: russwinter	Read Replies (1) \| Respond to of 116764

The next two years are hold on times for NDY. They do have some good low cost production. But, like HM, they have a good chunk of more marginal (@265) higher cost, smaller stuff (that adds up), and like HM have expense vulnerability to the stronger Aussie. They have profitably closed out much of their 2001-2002 forward sales, and have about 1.5 million of their 4.4 million anticipated production for that period locked in at only $285 US. The rest will have to be sold at spot. They have little room for error on production as they have about $860 million US debt on the balance sheet, half due within five years. NDY is liquidating capital (gold) at a pretty good clip, and doesn't seem to be in a hurry to replace it, having spent only $19.5 million on direct interest worldwide exploration. Thus, they may be a buyer of one of the few ripe projects in the hands of a junior? Vulnerable list: Bronezewing: 109K @ US 204 (using .55 conversion, if Aussie went to .60 costs would be 222) New Britannia (Canada): 55K @ $214 Paracatu: 115K @ 192 Martha: 43K @ $203 Wiluna: 60K @ $193 Mt. Charlotte: 54k @ $208 Boddington: 115K @ $198 Kalgoorlie: 365K @ $187 Kinross: smaller version of NDY except that they are pretty liquid financially with about 94 million cash and reasonable debt. They are actually a pretty good model on hedging, having entered the market at low prices to close out 150,000 oz of 2001 deliveries. They aren't afraid to close down junk either (Refugio). They have two mines that are just liquidating capital: Hoyle Pond 140K @ $187 and Ft. Knox 360K @ $206. FK seems to be suffering from the "slow dwindles" as grades have dropped from 0.98 (1999) to 0.87 (2000). Recoveries are off from 91% to 88%. If Kinross could pick up a good low cost project in the junior bear market, they might have a future?