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

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08 April 2016

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. 

Table of contents

    • 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

Tables and charts

This report includes 5 images and tables including:

  • Relationship between reserve price, 3-year rolling average, annual average spot price and reserve grade
  • 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
  • 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

What's included

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

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