Gold mining: what to look for in 2016 Report

Insight 29 January 2016

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*Please note that this report only includes an Excel data file if this is indicated in "What's included" below

Report summary

As the strength of the US$ continues to put downward pressure on the gold price, we expect to see further costs cuts as the industry continues to pursue improved margins. Miners in countries such as Russia, South Africa can expect strong windfalls from significant local currency devaluation relative to the US$. Although we don't expect a repeat of the impairments that plagued the sector in 2013/2014, the potential does exists for the industry to adopt a more conservative approach to reserve price estimation, resulting in shorter mine lives at operating mines as mine plans are reviewed. Although non-essential sustaining capex continues to be delayed/cut, reserve attrition and the forecast decline in global production from 2018 may trigger a trend reversal as miners focus on brownfield and greenfield exploration.

Executive summary
Where is the US dollar headed in 2016, what does this mean for the gold price?
Industry reserve position – can we expect a repeat of the impairments seen in 2013/2014?
Global gold mine production view for 2016
Gold mining costs in 2016 – fourth consecutive year of cost deflation
The health of the gold mining project pipeline in question
Free cash flow, capital allocation, financing and M&A
Conclusions

Tables and charts

This report includes the following images and tables:

Components of expected total cash cost plus sustaining capex (TCPS) variation from 2015 to 2016
2013 to present day view of the USD index, cross Atlantic yield differentials and the gold price.
Reserve price assumptions for top 15 gold producers as of end 2014.

Global gold production and metal price evolution.
Total cash cost plus sustaining capex (TCPS) variation from 2015 to 2016
Incentive price curve for identified primary gold mines.
Wood Mackenzie project pipeline demonstrating capital costs over LoM for projects and price paid for 2014/2015 acquisitions.