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

To: Ron Everest who wrote (34069)	5/18/1999 9:40:00 AM
From: Alex	Respond to of 116929

Australian Gold Producers in Price Squeeze The conspiracy to hold down gold prices. The Australian gold price is trading at its lowest level since February 1985 and local producers are feeling the effects. However, most are coping with the squeeze because they have sold significant quantities of gold forward at much higher levels than current spot prices. Australian gold prices have been hit by a weaker US dollar gold price and a stronger Australian dollar. These combined to push the price of Australian dollar gold to A$412 per troy ounce last week. "With average Australian total cash production costs at US$264/oz (A$400/oz), the average Australian gold mine is just breaking even," said Paul Gooday, gold analyst with AME Mineral Economics, a Sydney-based commodity consulting and research group. But that's the average. A lot are losing money. "For the March 1999 quarter, 24 per cent of Australia's gold was produced at a cost higher than the current Australian dollar gold price," said Mike Chester, gold analyst with Salomon Smith Barney in Melbourne. This is despite cost-cutting by Australian gold producers. Since March 1997 cash operating costs have fallen by almost 17 per cent, from A$379/oz to A$316/oz in the December 1998 quarter. Australia's big gold producers' cash costs vary dramatically. Australia's largest gold producer, Normandy Mining, produced 1.6m oz last year at an average cash cost of US$194/oz; Great Central Mines, the second largest producer with 734,183oz had average cash operating costs of US$192/oz; Newcrest produced 576,800oz at US$234/oz; Acacia 510,518oz at US$171/oz; Delta Gold 378,648oz at US$108/oz; Sons of Gwalia 483,127oz at US$230/oz; and Normandy NFM 209,680oz at US$193/oz, according to AME. These producers account for 45 per cent of Australia's gold production However, from these lower cost levels, further reductions will be more difficult to achieve. "We do not anticipate any further sustainable reductions," said Mike Chester. He estimates the average cash operating costs for Australian gold producers to be A$318/oz in 1999. "This environment makes Australia's gold sector ripe for rationalisation," said Mr Chester. However, Australian gold producers are still highly profitable, with average net profits before abnormal items for the 18 key producers estimated at A$492m over 1998/99, according to Salomon Smith Barney. ------------------------------------------------------------------------ John Willson, president and chief executive of Canadian gold group Placer Dome, avoids words such as conspiracy, but believes malign forces are depressing world gold prices, writes Gillian O'Connor. "I find it difficult to believe, given what [Alan] Greenspan said in the middle of last year, concerning the central banks' intention to maintain a low gold price, that there is not some concerted action going on between central banks to hold inflation down through holding down the price of gold," Mr Willson says. "I personally cannot see [this] but many economists believe holding down gold prices holds down inflation." He added that Placer's expansion plans, which could have involved equity funding, had been shelved because of the sharp fall in its share price that followed news of a UK Treasury gold auction. The Financial Times, May 18, 1999