Quick gold mine closures not expected despite bullion's fall

By Nicole Mordant
July 21 (Reuters) - Bullion's slump to a five-year low this
week is heaping new pressure on an already stressed gold mining
industry but mine closures are not expected to happen quickly as
operators instead try to reduce costs to keep operations going.
Exploration spending, capital to sustain operations,
dividends and head office costs, including use of corporate
jets, could face more cuts even after gold miners slashed costs
by about a fifth since 2012 as bullion fell.
If gold was to stay around its current price of $1,100 per
ounce, there could be some fairly significant mine closures over
time, said Chuck Jeannes, the Chief Executive of Goldcorp Inc
G.TO , the world's biggest gold miner by market value.
"But I always warn people that they are not going to happen
as fast as you think they might because mine general managers
are really good at keeping their mines alive," he said in an
interview.
Mine managers could defer capital spending, crimping future
growth, and raise the grade of ore that can be mined, to make
mines more profitable.
But with that comes risks, Jeannes said. "The more you do of
that the more you harm the long-term success of the asset," he
said.
At a gold price of $1,100, some 76 percent of producing gold
mines are in the red, according to data from Thomson Reuters
GFMS. That despite the fact that industry all-in costs are
expected to fall to an average of around $1,335 an ounce this
year, down from close to $1,700 in 2012.
GFMS' definition of all-in costs include total production
costs, head office overheads, interest charges, exploration and
sustaining spending and extraordinary charges such as asset
write-downs.
Bullion on Monday fell more than 3 percent to as low as
$1,088 per ounce, sending gold mining shares plunging. Although
gold was slightly higher on Tuesday, last at $1,100, many
dealers were bracing for more losses. ID:nL1N1011U8
As miners continue trimming costs, mine closures could be 12
months out, said David J. Christensen, Chief Investment Officer
of ASA Gold and Precious Metals, a precious metals and mining
fund.
In addition to deferring development capital spending, the
market should also expect to see management and board
compensation cut and the use of company aircraft curtailed, RBC
Capital Markets analyst Stephen Walker said in a note to
clients.
Barrick Gold ABX.TO , Centerra Gold CG.TO , Goldcorp and
Yamana Gold YRI.TO could reduce their dividends, Walker said.
Gold miner Newmont Mining NEM.N kicks off the quarterly
earnings season on Wednesday.