Barclays: Capex Spending By Gold Producers Lowest Since 2009

By Paul Ploumis (ScrapMonster Author)

December 08, 2015 03:07:12 AM

(Kitco News) - Capital expenditures by gold producers tracked by Barclays hit the lowest level in more than six years, the bank reports.

“Although gold miners this year have been posting solid operational performances and are in positive cash-flow positions generally, there are risks of long-term supply due to lowered capex spending along with weak prices,” the bank says.

Analysts collected data for 34 producers. This showed that third-quarter capital spending of $2.56 billion was down 20.6% year-on-year and 6.2% quarter-on-quarter. This also was the lowest quarterly capex spending since the first quarter of 2009, Barclays says.

“Miners’ gold reserves declined to the lowest level since 2007. There are two reasons for the decline,” the bank says.

“The first is the fallback in exploration and upgrading due to reduced capex spending. The other is that lower prices have made some mines uneconomical, thus can no longer be classified as reserves. The exclusion of uneconomical mines is supported by the increase in ore grades. Ore grade in reserves has rebounded since 2012 after a long-term decline, suggesting that low-quality mines are no longer viable to mine.”  

A drop capital expenditures for gold producers likely has limited impact on gold prices in the near term due to existing above-ground stocks, but could have medium-term implications, says Barclays.

Courtesy: Kitco News