Citi: Cost cuts help gold miners now, but trouble ahead

|By:, SA News Editor

Austerity moves clearly have helped gold miners navigate through the lower price environment, but Citigroup analysts warn that further belt-tightening will be difficult, and may even hurt long-term prospects.

Citi cautions that the slowdown in capex invariably will result in a fall in production, which in turn will lead to a faster rise in unit costs; also, the recent increase in head grades across the global mining space is an unsustainable mining practice that can have further detrimental effects on future mine plans and ore bodies.

Among miners Citi sees as most vulnerable to a low gold price environment are Sibanye Gold (NYSE:SBGL), Harmony Gold (NYSE:HMY) and DRDGOLD (NYSE:DRD), which the least vulnerable are Goldcorp (NYSE:GG), Barrick Gold (NYSE:ABX), Yamana (NYSE:AUY), Medusa Mining (OTC:MDSMF) and OceanaGold (OTCPK:OCANF).

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