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More On Gold Mining Production Costs

|Includes:ABX, VanEck Vectors Gold Miners ETF (GDX), GDXJ, GG, KGC, NEM

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."