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7 Pages

How changes in gold reserve price led to a $60 billion write-down


How changes in gold reserve price led to a $60 billion write-down

Report summary

Despite a 300% increase in the gold price between 2002 and 2015, global reserves at primary gold mines have risen by just 28% over the same period (after taking into account depletion). Reserve replacement increased rapidly between 2002 and 2012 as the industry increased reserve price assumptions from US$300/oz to US$1,344/oz. This resulted in reduced cut-off grades and was accompanied by paltry margins through the bull. With the fall in gold prices since 2013, industry reserve prices have dropped sharply to US$1,202/oz at December 2013 and again to US$1,117/oz by the end of 2015. As a result 10 major producers have reported impairments of US$60 billion - affecting the liquidity of some of these companies. 

What's included?

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  • How changes in gold reserve price led to a $60 billion write-down PDF - 363.02 KB 7 Pages, 1 Tables, 4 Figures

Description

This Metals Insight report highlights the key issues surrounding this topic, and draws out the implications for those involved.

For industry participants and advisors who want to look at the trends, risks and issues surrounding this topic, this report gives you an expert point of view to help inform your decision making.

Our analysts are based in the markets they analyse and work with high-quality proprietary data to provide consistent and reliable insight.

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  • Executive summary
    • How are reserve price assumptions determined?
      • Reserve price assumptions by selected major producers US$/oz
      • Range in industry reserve price assumptions from the mean
    • What happens if the price falls by US$100/oz
    • Balance sheet erosion in the gold mining sector since 2013
    • Impact on mine life
  • Conclusions

In this report there are 5 tables or charts, including:

  • Executive summary
    • Relationship between reserve price, 3-year rolling average, annual average spot price and reserve grade
    • How changes in gold reserve price led to a $60 billion write-down: Table 1
    • How changes in gold reserve price led to a $60 billion write-down: Image 2
    • Sensitivity of metal contained in reserve to a US$100/oz fall in reserve price
    • Write-downs and impairments recorded by selected companies 2013-2015
  • Conclusions
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