HomeGoldMines cut spending as gold prices fall

Mines cut spending as gold prices fall

The South Deep
twin shafts at dusk
Johannesburg, South Africa — MININGREVIEW.COM — 29 October 2008 – Three of Africa’s biggest gold producers – AngloGold Ashanti Limited, Gold Fields Limited and Harmony Gold Mining Company – may review spending plans in the wake of tumbling metal prices and tightening credit availability.

The Johannesburg-based companies – which are due to report quarterly earnings this week – face rising expenses, higher financing costs and declining demand for the metal among investors.

Gold has slumped about 20% since trading at a record US$1 032.70 in March. Yesterday the Credit Suisse Group AG said worsening credit markets and commodity prices might lead mining companies to defer US$50 billion (R525 billion) of development projects globally for a year.

Emerging gold and uranium miner Simmer & Jack Mines Limited has revealed its intention of slowing down project development because the funding availability had deteriorated significantly since April. And Johannesburg-based Pamodzi Gold Limited has implemented what it calls a ‘survival plan’ after struggling to find willing lenders.

Bloomberg News points out that Gold Fields spent US$71 million (R785 million) in the year to 30 June 2008 at its South Deep mine as part of a plan to boost output to 800 000 ounces by 2014. AngloGold is considering spending as much as R10 billion to deepen its Mponeng mine to 4 300m

South African miners pay costs in rand and sell commodities for dollars, so while a weaker local currency has partially offset the drop in commodity prices, gold has become more expensive to produce, according to the agency.. Gold Fields spent US$502 to produce each ounce of gold in the second quarter, while AngloGold spent US$434 and Harmony US$591.