St. LOUIS () -- The world's No. 2 gold producer, Newmont Mining Corp. [NYSE:NEM], said on Thursday its gold sales fell 10% in 2007 and forecast sales would not increase in 2008. This follows reports by the world's No. 3 and 4 gold producers with similar results showing production on the decline with costs rising.
Newmont reported total equity gold sales of 5.3 million ounces in 2007, down from 5.9 million ounces in 2006, but in line with the company's estimates in October of 5.2 million to 5.4 million ounces. Cash costs were $406 per ounce, the low end of the $400 to $430 costs it had expected, but a 34% increase from last year's $303/oz.
Also on Thursday, AngloGold Ashanti [NYSE:AU], the world's third largest gold producer, reported that gold production declined 3% to 5.48 million ounces in 2007, with costs up 16% at $357/oz. In 2008, the company is expecting to produce between 4.8 and 5.0 million ounces of gold at cash costs ranging from $425/oz to $435/oz.
Last month, Gold Fields [NYSE:GFI] reported quarterly results for its second quarter ending Dec. 31, 2007, which brought total 2007 production in at about 4.6 million ounces, compared with 4.75 million ounces in 2006. Total cash costs rose 8% to $467 an ounce. The company also predicted a 20%-25% fall in output for the current quarter to end-March due to the power crisis in South Africa.
Barrick [NYSE:ABX; TSX:ABX], the world's largest gold producer, told delegates at this year's in Cape Town, South Africa, that the company is on track with its estimate of 8.1 million ounces of gold production at a cash cost of $350/oz for 2007. This would be down from last year's 8.64 million ounces of gold at total cash costs of $282/oz.
Newmont said it expects total 2008 gold sales to be comparable to 2007 between 5.1 million and 5.4 million ounces, but cash cost will again rise by about 8% on average to $425-$450/oz for the year "as continued industry-wide operating cost pressures are expected to be compounded by slightly lower gold grades."
The company's reserve grade fell slightly to 0.033 ounces per tonne compared to 0.034 oz/t in 2006 due to both higher metal prices and the average depletion grade of 0.042 oz/t in 2007. Newmont reported year end 2007 proven and probable reserves of 86.5 million equity ounces compared with 93.9 million equity ounces at the end of 2006.
Capital expenditures for 2008 were forecast to be between $1.8 billion and $2.0 billion, up from $1.7 billion in 2007. The company expects to spend approximately $220 to $230 million on exploration activities in 2008, including approximately $29 million at the recently acquired Hope Bay project in Nunavut, Canada.
A day to watch is February 21, when four biggest names report financial results: Barrick, Newmont., Goldcorp and Kinross.
Share Price Analysis
Nearly all major gold producers saw a nice tick up in share prices in January, as gold surged $100 from $830 to $930, breaking all-time highs set 28 years ago. Today, spot gold finished above $900 once again, rising $5.90 to $906.40.
In mid-January, Newmont hit a new 52-week high of 55.79, and has been trading in the $50-$55 range ever since - now at $50.22.
Barrick hit a 52-week high of $54.00 just last week, now trading at $48.11. The chart below shows that Barrick has outperformed the others in the last 6 months.
AngloGold hit a 52-week high of $51.35 in mid-January, but has since fallen back to $38.57 largely due to the power struggles in South Africa.
Gold Fields, although did not break its 52-week high of $20.70, came very close in mid-January at $18.08. Shares have fallen back to $13.47 since, also due to power shortages.
