Since December, gold miners have seen a bounce in share prices. One factor for this may be the US Fed's decision to carry on its quantitative easing and not taper back its bond buying as strongly as initially expected, giving the market a reason to buy gold as an inflationary hedge.
Some of the major miners are adjusting their production so that they can reduce their cash costs to improve productivity, making their prospects look better for the near term.
Gold movement
After bottoming out at around US$1,200 in mid-December, gold has crept up to US$1,318, giving some stability to gold miners. Many saw the spot price getting closer to their all-in sustaining costs. Falling gold prices drive the miners down and force them to change production and cut costs to stay viable.
Changing production to boost results
Gold miner Newcrest Mining Limited (ASX: NCM) has rallied some 58% since dropping to about $6.99 a share in mid-December. It had to reduce production of lower grade gold and concentrated on the higher grades to get its all-in sustaining costs down to $1,003/oz.
Then the first-half 2014 report released last week showed gold production was up 27%. The market was pleased to see all the mines had their all-in sustaining costs below the average realised price of $1,405/oz.
Other miners
Regis Resources Limited (ASX: RRL) produced 71,991 oz with a cash cost of production of $744 before royalties in the December quarter, and sold 73,487oz at a delivered price of $1,493/oz, up slightly from $1,477/oz in the previous quarter.
It is up about 17% to $3.09 since a January low of $2.63.
AngloGold Ashanti Limited (ASX: AGG) announced last week that it is selling its Navachab mine in Namibia for US$110 million. For the nine months up to 30 September 2013, the mine produced about 46,000 oz at a cash cost of US$755/oz. According to the company, the mine contributed less than 2% of the company's total production of mineral resources and ore reserves.
Its share price closed at $3.89, up 56% since late December.
Foolish takeaway
Miners' share prices can move by a disproportionately higher percentage when gold rises and conversely can fall quicker when gold is decreasing. The rises we are seeing currently are off very low bottoms. For new investors, it may present some opportunities, but for existing shareholders have seen heavy losses in share price.
