Gold miner results to get "another kick in the pants" on reserve losses

|By:, SA News Editor

Gold mining (GDX) CEOs may be wishing they had followed the lead of Kinross Gold (KGC) in reducing its gold reserves last year after most of the big North American miners report year-end results this week; thanks in part to the reserve issue, they could be a huge mess, FP's Peter Koven writes.

The miners didn't see last year's 27% price plunge coming: With the exception of KGC, their reserves are calculated based on prices far above the current ~$1,250/oz., as Barrick Gold's (ABX) reserves are calculated at $1,500/oz., Goldcorp (GG) uses $1,350 and Newmont Mining (NEM) $1,400 - those numbers will come way down when year-end results are reported.

"You would think after the tens of billions of writedowns that the industry suffered that we would be done," says Deutsche Bank's Jorge Beristain, "but no, it is going to be another kick in the pants for the fourth quarter."

The miners at greatest risk for reserve reductions are those with high costs and low grades, such as Golden Star Resources (GSS), Iamgold (IAG) and Gold Fields (GFI).