Analysis: Gold Mines near Tipping Point as Price Falls

Analysis: Gold Mines near Tipping Point as Price Falls


BYLINE: Nicole Mordant Vancouver
THE PRICE of gold, down more than a third in three years, is approaching the tipping point where the mining industry would see a spike in the number of producers reducing output or even shutting down operations.
Several mines globally have already suspended output in the past 18 months, but not as many as industry watchers expected as producers have focused on slashing costs and reworking mine plans to extract more profitable, higher-grade ounces.
But with bullion's slide this week to a nine-month low of $1 208.36 (R13 462) an ounce, those defences may not be enough.
Joseph Foster, a portfolio manager at asset management firm Van Eck Global, said $1 200 was a critical level. "The industry has geared itself around $1 200. If it falls below that level, then a lot of mines around the world are really going to struggle."
Van Eck is a major investor in Barrick Gold and Goldcorp and a top shareholder in most other large gold producers.
Production cutbacks and mine closures would spell more financial pain for producers and investors, who have watched gold mining stocks slump 67 percent since September 2011.
And cuts and closures could be swifter and deeper than in the last gold bear market as most producers this time around have not offset the risk of potential losses by hedging, or selling gold forward at a fixed price

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