Abidjan, Ivory Coast — 10 May 2013 – Gold producers are likely to scale back exploration programmes as lower prices spur cost cuts, according to the head of Endeavour Mining Corporation.
“The industry has just gone through quite a shock in terms of reduction in the gold price,” Endeavour CEO Neil Woodyer said here. “Mining expenditure on projects will be down. The industry will be focused on cost containment, essential expenditures and less exploration.”
Bullion has lost 12% this year, tumbling into a bear market last month, as the MSCI All-Country World Index of equities climbed 11%. Efforts to boost economic stability have eroded demand for haven assets such as gold as money starts to flow into riskier investments.
The drop in prices has already affected “economic projects and ongoing operations” in the industry, Woodyer said in an interview with Bloomberg News. “It’s a process all mining companies are going through, and some are holding their development projects until they see results of changes in the economic environment.”
Endeavour operates in Ghana, Burkina Faso and Mali, and is building its fourth West African mine in Ivory Coast, due to start in the first quarter of next year, according to Woodyer. Output may rise 17% to 350,000oz this year following the expansion of Mali’s Tabakoto mine, and reach 450,000 ounces in 2014 once Ivory Coast’s Agbaou project starts, he said.
Endeavour, which had planned to spend US$200 million this year, will review its budget and “see what is absolutely essential,” Woodyer said. The Georgetown, Cayman Islands-based producer will also seek to reduce operating costs as it becomes “less focused on growth and more focused on cash generation.”
Even with falling prices, the company will keep its US$120 million budget for Agbaou as “it is a new efficient mine and it is a first step to other things we can do in Ivory Coast,” Woodyer said, citing the country’s “tremendous potential” and Endeavour’s ability to “get through the present gold climate.”
The Agbaou site, about 200km northwest of Abidjan, has estimated reserves of 905,000oz and forecast gold production averaging 103,000oz a year over eight years, according to a statement e-mailed by Endeavour.
Ivory Coast, French-speaking West Africa’s biggest economy, has announced plans to review its mining code, which dates from 1995. The nation, which produces gold, diamonds and manganese, is following the lead of Ghana, Guinea, Zambia and Zimbabwe in seeking more government revenue from mineral extraction.
Source: Bloomberg News. For more information, click here.