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Falling gold prices have pushed miners to make drastic changes to their operating plans, but companies with healthy balance sheets and low cost bases should adapt without much trouble, experts said.
For the miners with marginal projects or weak balance sheets, it is a very different story. Precious metals companies have started to announce spending reductions, project deferrals and other adjustments in recent weeks as the gold price languishes below US$1,300 an ounce. Many similar announcements will be made when the senior and mid-size miners begin reporting second quarter results next week.
On Tuesday, Eldorado Gold Corp. provided a template for the types of moves its peers are likely to make. The Vancouver-based miner delayed three projects, deferred another and reduced its capital spending and exploration budgets for 2013 by a combined US$287.5-million (or 37%). Eldorado also said it will evaluate its dividend policy, though it did not announce any immediate reduction to the payout.
The company won praise from analysts and investors for making sensible moves that allow it to preserve capital while continuing to grow. “The revisions appear prudent and preserve balance sheet flexibility. More gold companies are expected to follow this trend given the low metal prices,” BMO Capital Markets analyst David Haughton wrote in a note.
In an interview, Eldorado chief executive Paul Wright said that good companies should not have any trouble operating in this environment.
“This isn’t a bad gold price,” he said. “If you’ve constructed a quality business with good jurisdictions, low costs and a healthy balance sheet, this isn’t a great hardship.”
Unfortunately for investors, there are many gold companies that do not meet those criteria.
For the rest of this article, click here: http://business.financialpost.com/2013/07/16/eldorados-move-to-preserve-capital-signals-whats-to-come-from-other-gold-miners/