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Jason Burack
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Investor, Entrepreneur, Financial Historian, Austrian School Economist, Investment Analyst, and Contrarian. Co-founded the investor education, financial education and consulting company, Wall St for Main St, LLC in 2009. I've taught beginners how to invest and also consulted for high net worth... More
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  • More On Gold Mining Production Costs 0 comments
    Apr 27, 2013 8:21 PM | about stocks: GDX, GDXJ, ABX, NEM, GG, KGC

    Here is a study from Royal Bank of Canada.

    Their mining analysts did a stress test of sorts on North American gold producers, finding "significant pain" should bullion plunge further to $1,300 an ounce.

    Here's what Stephen Walker, the head of the bank's global mining research, and analysts Dan Rollins and Sam Crittenden found:

    Gold at $1,500 an ounce: "We estimate a low probability that our selected gold producers would trigger a single-notch credit ratings downgrade. We would expect producers to draw down existing credit facilities, consider cash-saving measures and, where necessary, seek debt financing in order to complete the existing capital spending programs."

    At $1,400: A "moderate probability" of a one-notch downgrade to Barrick Gold Corp., while all producers cut expenses and delay spending plans.

    At $1,300: A "moderate probability" of a one-notch hit to Newmont and Allied Nevada Gold, and a "conceivable" hit to non-investment grade debt ratings of Barrick and Kinross Gold Corp., while all producers would cut spending sharply, put off new programs and, for some, cut dividends.

    At $1,200: A "high probability" of non-investment grade hits to Barrick, Newmont Mining Corp. and Kinross. "We would expect all the gold producers to consider care and maintenance for high-cost mines, cut all discretionary expenses, cut capital spending programs, defer new development projects and consider cutting dividends."

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