Canadian Mining Journal


Gold Medal Performance

Nothing, including the global recession, could keep the price of gold from maintaining a strong showing in 2009. According to the PricewaterhouseCoopers 2009 Global Gold Price Survey Report of 58 lead...

Nothing, including the global recession, could keep the price of gold from maintaining a strong showing in 2009. According to the PricewaterhouseCoopers 2009 Global Gold Price Survey Report of 58 leading gold mining companies with global operations, the price started the year at US$875 and averaged US$959. The value climbed steadily with prices ranging between US$812 and peaking at over US$1,200 in early December. What lies ahead for 2010?

Gold production

In 2008, 44% of companies did not expect their production levels to change as a result of gold price volatility. Last year however, after seeing a significant increase in forecasted production levels over 2008, companies now appear to be giving more weight to anticipated increases in the price of gold. In fact, almost three-quarters of respondents reported an expected increase in their long-term production levels, and 91% percent of respondents expect gold prices to continue to rise in the next year.

Gold price assumptions, carrying values and reserves

Gold price assumptions have been increasing steadily over the last few years, with the most significant increases in 2009. Of the companies surveyed, 71% have determined the gold price assumptions that will be used in ongoing reserve determinations and carrying values at December 31, 2009. The average price indicated by respondents is US$764 for reserves compared to US$734 in 2008, and US$825 for carrying values compared with 2008’s price of US$751.

Just over half of the companies (58%) plan to use the same prices over time (2008: 69%). Some companies plan to use variable prices; of these companies, the average prices reported trend strongly downwards over the longer term. Companies continue to apply a consistent approach by using the same price assumptions across all locations where they have operations or properties.

Forty-five percent of companies responded that the current price of gold remained the leading factor considered when determining estimated gold prices used this year. Other important considerations include analysts’ price trend predictions (38%) and historical trends (36%), consistent with prior year results.


When it comes to financing, companies are more optimistic than last year when evaluating opportunities for available capital. The majority of companies (83%) stated that financing would be more readily available going forward into 2010. At this time last year, 89% of respondents reported that financing would be more difficult to secure, likely due to the credit crunch at that time.

Transparency of disclosures

In order to increase the transparency and relevance of their reporting, an important area of focus for those companies wishing to do so is to improve the robustness of disclosures around sensitivity of reserves to price assumptions and volatility in exchange rates. Of those surveyed, about 47% indicated they have not made this disclosure in prior years and might not do so again this year.

Looking at disclosure around exchange rates used, there is more transparency in this area as 44% identified they would disclose this information this year compared with 42% in 2008.

Major challenges

Yet, while gold has maintained a strong showing lately, executives are also recognizing that with the rewards, comes a host of challenges. Not surprisingly, the top three challenges cited by respondents are largely based on the changing economic landscape:

Higher costs: The price of energy has been in flux over this past year. The US dollar has lost strength against many currencies resulting in increased labour costs in local currency. Grades have decreased resulting in higher recovery costs.

Geopolitical: New or impending social, political, economic and environmental changes are impacting mining operations across the globe.

Dependability of estimates: Gold producers must account for dilution, recovery rates, cut-off grade and other complex factors when estimating reserves. As dilution increases producers incur more cash costs.

Looking ahead, gold producers will need to evaluate their means of replenishing reserves to keep up with demand, either through organic exploration, exploring/exploiting a past production area and acquisitions.

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