Billion dollar bonanza tipped for gold producers
Falling costs and firming gold prices should bring a bonanza according to S&P Market Intelligence.
They summed it up in this statement:
“Uncertainty over global growth, trade wars, the Federal Reserve’s cautious outlook on interest rates and recent Mergers and Acquisitions (M and A)deals have lifted interest in gold and gold mining companies.
Gold mining equities’ market capitalization has halved since 2012. This devaluation and a push for consolidation has increased M and A activity, with majors capitalizing on the reduction in enterprise values in 2018.
As the gold price began to decline after hitting its peak in 2011, gold mining companies began shifting their focus to maximizing value over volume, with greater emphasis on delivering returns to stakeholders than on increasing production.
Recent M and A deals tie into this theme as companies look to unlock synergistic cost savings through lower average costs and increased value.
This shift has seen gold production remain relatively constant among the top 30 gold mining equities between 2014 and 2018, at about 43 million ounces per year, with a 3 per cent increase expected in 2019.
The consensus earnings margin outlook of 30 per cent for gold mining equities is supported by our view on 2019 all-in sustaining cost, or AISC, margins at 33 per cent.
Falling all-in sustaining costs, alongside rising gold production and metal prices in 2019, could see earnings for gold miners increase 17 per cent or US$3.9B year over year.”
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