Gold miners’ costs are mostly higher than current spot prices, increasing the likelihood of writedowns next year, according to Nick Holland, chief executive officer of Gold Fields Ltd. (GFI)
Across the industry, costs are about $1,300 an ounce including debt repayments, Holland said by phone from Johannesburg today, citing analysts’ research. Gold dropped 0.1 percent to $1,182 an ounce, bringing the decline since the beginning of 2013 to 29 percent.
“The industry by and large is under water,” Holland said. “I would expect further writedowns. Production I think will be curtailed but it will take some time to filter through the system.”
Gold producers are struggling to adapt to a lower bullion price after a decade of debt-fueled expansion, acquisitions and cost inflation during the boom years that saw bullion peak at $1,921.17 an ounce in September 2011. The spot price has tumbled in the past 18 months as investors speculate the Federal Reserve will raise interest rates due to an improving U.S. economy, lowering demand for the safe-haven metal.