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Citi: "No Gold Company... Will Generate Free Cash Flow At Current Gold Prices"
After updating their precious metals' company cost curve, Citi's ominous warning that, "a combination of rising unit costs (15% yoy), sustained high capital budgets and a falling gold price have resulted in a fast contraction in margins - so much that no gold company under our coverage will generate Free Cash Flow at spot gold."
Via Citi,
Companies are trying to adjust by cutting capex, exploration and corporate costs. But we also notice that most of the global gold cost curve is burning cash at spot levels. Further cuts are needed in the coming 12 months to make ends meet.
We view this as a return to normal for global gold equities. Given the ‘price taker’ nature of the industry, the next decade will see high-cost asset disposals, reduced capital budgets, lower exploration expenditure and balance sheet recapitalisation as companies try to survive in a lower gold price environment...
Or,
...as China seems to be showing the world, we will see supply reductions occurring at the same time as the rolling over of 'peak suppression' of the gold price and the precious metal will realize its real fiat-numeraire-based value.
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Sell paper. Buy physical. Sleep well.
Sell everything paper (stocks, bonds, bank balances..etc.) and buy physical gold and silver,
and sleep like a baby.
t
"no gold company under our coverage will generate Free Cash Flow at spot gold"
and *that*, of course, is just another reason why we need to go ahead and Stop Mining Precious Metals
Gold miners already producing gold at all-in costs close to $1300 in 2012 - even higher Q1
http://seekingalpha.com/article/1346991-the-true-all-in-cost-to-mine-gold-complete-2012-figures
Fed forgot miners actually have to mine the stuff - VERY important for physical picture...
Drive the miners to crap then buy 'em. If gold will be foundation of the new reserve currency, then the banksters will want to get their grubby mitts on the production. Alternatively make equity capital so expensive that it is prohibitive and force them into bank financing for new projects/acquistions. Of course and bank financing will require forward sales/hedge contracts.
Can't they just print gold?
They've been doing that at Comex and LME.
Well, Comex and LME need to hire a professional printer to restore everyone's faith. Bring in Bernanke and put him to work. There will be 1,000 ozt of gold for every man, woman and child on earth by the end of Bernanke's first week on the job. Problem solved!
The gold price is crashing because there is a worldwide stampede into physical gold. What?!
http://www.goldminerpulse.com/v/shanghaiGoldExchangePhysicalDelivery.php
Nonsense. The gold price cratered because the I-banks that sold hedges to the miners have had to pyramid their shorts as prices fell in order to keep from losing money.
Shades of portfolio insurance back in 1987.
Wait for the snap back when these short positions have to be covered.
When comparing a hypothesis against contrary experimental evidence it is always best to:
a) weigh contrary evidence against hypothesis looking for possible flaws in hypothesis
b) ignore contrary evidence and search for evidence which confirms hypothesis
You are looking evil in the eye.
Decreasing gold supply as physical gold demand increases is going to cause the gold price to collapse.
yes that can be happening simlpy because the price of gold was run up too high previously
i have a gold card, isnt that as good as money?
@ Bastiat
+ 1
I have read something like this about three times now, the banksters will beat the gold miners to near-death, then buy 'em the cheap. Disgusting.
if everybody had a mind to.. run all their "credit" to a max..
keep their cash in reserve (not in some schmuck bank)
. stop sending payments... let it all go beyond 90 days... the fireworks would pale the tragedy of this weekend,
BOOM.
What better way to kill the idea of a gold reserve than to destroy gold mining once and for all?
I'm going all in to the Tungsten ETF.
Hedge that out with some SEARS stock
I would, but got all my extra cash in JCP and FB.
dont believe those cost figures and dont trust SA
do your own research and if you own miners get the facts for yourself
I agree with you 100% Spider, but you could have been more concise in your analysis.
I was referring to your first post.
Gold miners are the real banks and they are taking a beating because of the FED. The same thing but worse is taking place in the top silver miners. I discuss this in my newest post at the SRSrocco Report at the link below.
http://srsroccoreport.com/silver-mining-costs-exposed-cash-cost-fallacy/...
Nobody's going to save them - collateral damage in the traitorous bankers transfer of gold from west to east.
Then why was gold and silver being mined at much lower prices in the past? I believe the Citi (aka Shittygroup) aritcle is a complete lie via accounting gimmickery. Any business can allocate expenses to any one or more production facilities. For miners to pay almost no taxes, it makes total sense for them to throw as many of the expenses as possible toward the asset that is losing value, thus a tax sheltering.
Most silver is mined as a byproduct. So it can't be that it is now "below production costs". It may be below accounting tax loss costs, but not production.
If this isn't the case and I am wrong, then how was silver mined 10 years ago? Have costs risen 10 fold?
I ask myself the same question all the time. Why have things suddenly become so much more expensive for the miners, compared to everyone else? But what's the alternative explanation for their shitty financial (not to mention share price) performance?
What was the price of gas 10 years ago? CAT's run on gas, not air...
NOPE... You are not getting confused with cash costs? Part of the reason why gold mining costs have more than quadrupled is due to the 4-5 fold increase of the price of oil since 2000.
Furthermore the gold miners are probably under stating costs rather than hiding profits.
If this isn't the case and I am wrong, then how was silver mined 10 years ago? Have costs risen 10 fold?
Not 10 fold but yes higher costs etc. i.e. inflation. That's why lower gold & silver prices are an anomaly at this point in time. They should be higher to adjust for inflation. Manipulation has distorted the market. But it's like a spring under pressure, you can only hold it down for so long. And the more pressure you apply, the stronger the release will be.
The cost of JPM issuing paper gold is a tiny fraction of mining real gold out of the ground.
Diversify between quality stocks, cash, gold, silver, (commercial) property, food & protection, pay off your debt, move outside the US if possible,
and never have to worry about anything for the rest of your life.
Yup yup.
Miners are now fed up. This is good, for anyone with the physical in hand. Anyone holding IOU's are up shit creek.
I dont believe anything from Citi including that bogus chart on "costs" I understand some of the miners understate their costs but for the last year they have been pressured to throw in everything but the kitchen sink and are treated with a different standard than favorite ben and mo-mo stocks,
No way I believe NEM and GG have the exact same cost - for example from GGs first quarter report
"All-in sustaining costs of $1,135 per ounce compared with $814 in 2012."
NEM s first quarter report indicates all in costs at $1100-1200 - there is great variance by location;
I have seen all in costs in NA for some miners well below $1000
where was Citi when gold was $1900
Sell paper. Buy physical. Sleep well.
get a 26 yr old girl friend
give up on sleeping ..
Get a 26 y.o. girlfriend, and give up the gold too.
;-),
Get a 36yr old girlfriend and keep them both.
Get a 36 y.o girlfriend and lose the gold twice as fast.
Get a 46 y.o girlfriend and lose the gold even faster.
Get a 56 y.o girlfriend and lose all of it right away.
The older they get, the more motivated they are by money, and the less use they have for men!
You and I have had vastly different experiences with women. :)
"We view this as a return to normal for global gold equities" GOLD EQUITIES? Is that like a piece of paper with the word "gold" printed on it numerous times so we feel all warm and fuzzy looking at it?
"This is not the supply squeeze you're looking for."
........ummm yeah.
Bring it, you manipulating fuckwits.
Keep stack'n.
Japan up tonight...futures are up. It's all Bullshit!!!
Then how in the hell is the price of silver and gold BELOW what it takes to produce it with all costs going up such as energy, OBAMACARE adding to the labor burden, environmental regulations, on and one.
WHY THE HELL IS SOMEONE NOT IN JAIL OR FUCKING DEAD because of their criminal price fixing conduct to offset their "paper" PM losses.
FUCK 'em if they lost betting on paper, FUCK 'EM with a .357 in the ear!!!!!
"WHY THE HELL IS SOMEONE NOT IN JAIL OR FUCKING DEAD because of their criminal price fixing"
~~~
+1 Francis
Keep in mind however that no 'Conspiracy Theory' ever becomes 'Conspiracy Fact'... Those silly notions have been discredited time & time again on ZH...
I remember, it wasn't really all that long ago now, the Theory that Central Bankers around the world were going start printing money(QE), and at about the same time, was thought of as being ridiculous.
Turn those machines back on!
http://www.youtube.com/watch?v=B71HytDmEso
Uh.....ruse?
Uhm... DAs, judges and politicians?
Just knockin' down the miners to firesale prices by putting 'em out of business [so they can come in and acquire controlling stakes in them with printed money]...
~~~
All in a day's work...
Heck, they even have their lackey Cramer pimping gold now.
@ francis_sawyer
Cheesespooze?
jail is for little people
Exactly.
"FUCK 'EM with a .357 in the ear!!!!!" Precise, to the point, perfect punctuation, no unnecessary adjectives or verbs, and 100% correct spelling. A+
"WHY THE HELL IS SOMEONE NOT IN JAIL OR FUCKING DEAD..."
Let's see, CIA torture whistleblower John Kiriakou is in jail and journalist Michael Hastings is dead.
Check your facts before you post....
/sarc
Ha Ha, these poor fuckers live in the worst of all imaginable worlds. While everybody else enjoys record low inflation and record low interest rates, for some reason, only the gold companies are seeing rise costs and high financing costs. And then to add insult to injury, they produce the ONLY FUCKING MATERIAL IN THE WORLD WHO'S PRICE GOES DOWN AS DEMAND GOES UP. Must be killing them.
Selling paper that will be worth nothing soon. It is immoral but profitable. I wish it was illegal....
Good buying opportunity 'eh?
If you want to own shares in companies marked for death by the powerful and corrupt entities that run the global financial system, sure.
I ain't selling, and yet I completely agree.
Only the ones with bad balance sheets are marked for death. The good companies will survive and make people who have the guts to buy them very rich.
"And then to add insult to injury, they produce the ONLY FUCKING MATERIAL IN THE WORLD WHO'S PRICE GOES DOWN AS DEMAND GOES UP."
Patience, grasshopper. When you take the oil future from my hand, you will be ready.
They're sellers. They're supposed to be the ones SETTING the price.
Only they need to realize.
There's a huge business opportunity establishing channels that connect retail stores with miners.
I'll take supply reductions for $1000, Alex.
China's on my side, I can wait.
Citi will be gone in 2 years.
Citi SHOULD HAVE BEEN gone 2 years ago.
Friends in high places though. Ben made it pretty clear from the get-go that he'd never let anything happen to his banks.
The day that Obama, Bush and McCain all got together and said "yes, bailouts", was the day I woke up.
Buy gold and silver and solid U.S. equities that can survive no matter what fiat does. Sleep very well and make some money so you can drink good wine when you are not sleeping.
F*d industry that was actually able to produce FCF last time gold was at 1200. E.g. AUY, NEM, hapless KGC, & EGO all were able to generate FCF (per morningstar) in 2009 & 2010, when Au was 1,200 or less. Hard to believe that ore grades have gone down that much. + with the currencies kaputt in most of those other banana republics in which mines operate, + supply of engineers from closed shops, cap goods from CAT not selling at a premium, one would think that op ex would be manageable.
As the price of gold (or any mined commodity) goes up, the miners will increase production and income by going after lower grade more expensive to process deposits as they become profitable due to the higher price. A sharp drop in price won't kill (most) of the miners, but they need to shut down the lower grade mines and focus on higher grade lower cost operation.
In the short term (even 5-10 years), rising gold price was probably more responsible for rising mining cost than Vice Versa.
Very, very strange. driving the price down not only empties the Comex vaults, it markedly reduces the production of the resource. Supply goes down, demand goes down. isn't that the opposite of the law of economics. Are there any economic laws anymore about anything? And because there does not seem to be, how do you invest? Buy gold? But due to the paper gold they can keep driving the price down. So buy gold and lose money or just keep cash and lose money to inflation? Those seem to be the choices.
Right.
Government elites to investors. We fuck you.
Demand could go down and supply could also go down if supply gets used up/bought up. Price goes down in accordance. Nothing breaking or bending the rules about that.
how can demand go down and supply go down. That does not make sense.
gold is not a consumable so every holder of gold is a potential seller
We can only guess since they manipulate the game.
So much for the flow...on to the stock: who's selling?
Anyone, anyone...Bueller, Bueller?
http://www.youtube.com/watch?v=uhiCFdWeQfA
File this one under the Fed fkd up and destroyed a global industry. So much for that whole full employment mandate thing--Which by the way was added because the Fed has the ability to crush the economy for banking profit, not because they were supposed to create jobs. This is exactly what they were not supposed to do. And this is why the Fed cannot be trusted to even know how to successfully manage anything and must be abolished.
Bullshit on Citi comment.
Endeavour Mining (EDV-TC) generates free cash flow at $1,200 gold.
Roughly $100mm in 2013. More if gold up from 1,200.
Market cap. is roughly $220 mm.
Obviously market thinks gold going to $500.
We will see. Recovering gold price and this is a 5 bagger.
They made 100 million on 475 million revenue at an average price of ~1500$ in the first 3 quarters ... they're going to go into the red long before 500$. They could in theory turn a small profit even at current prices but fuel prices must be pushing up their cash costs ...
Technically, they had a negative 16 million in cash flow last Q due to "all in costs", which include everything.
Wrong analysis dude.
Cash flow from sustaining biz was $39 mm in Q1. All costs included.
Your figure includes expansion CAPEX. They are investing to double production . That is not all in costs, that is future production which would double the 39mm cash flow.
Apples and oranges.
>> Bullshit on Citi comment.
>> Endeavour Mining
Excuse me if I'm mistaken (my old eyes aren't what they used to be, like a lot of other things), but I didn't see Endeavour on that list.I'm pretty sure Citi's comment was directed towards miners that they cover.
"No Gold Company"
Sounds pretty all inclusive to me.
Asian day trader here, N225 opened higher around 50 points and looks like it's gonna take out 14500 by the end of day.
Gold 1223, US stocks opened higher. everything's upppppppp! Except PMs.
No more gold being mined?
Why, whatever will become of the fiat price of the already mined?
Truly a catastrophe for me ;-)
cost of getting trillions out of the heidelbergs is nil. equipment paid for and should run for another 20 years without replacement. economists are not so pricey.
The "heidelbergs" time is up, they better get some taste testers for their taste testers and some guards for their guards.
Citi should hire us. Some of us have been saying the exact same thing weeks ago.
Hey Citi, here's a forecast:
1. At these prices, the big goldfish will eat the little goldfish, just to consume their cashflow.
2. Else, the loan holders (Citi and friends) will own the defaulted goldmines. Nice way for banks to own tons of gold in lieu of tons of paper.
Keep stacking. Give 'em the goldfinger.
Grades are lower overall, so harder to high-grade through this downturn
We live in a world where up is down, liabilities are assets and the bankster cartel rules over greedy elected members. In a world where mountains of freshly-printed fiat are referred to as currency and wealth while tangible, hard and sound money is discarded as 'tradition'. Something is horrifically wrong with this picture!!!
Thar she blows the JD whale fart we've all been waiting for.
Price stays down, PTB own mines outright.
100% control of PMs
100% control of all government
Citi can claim to be an expert on mining for now but they don't know jack shit about banking that's for sure.
What's to know? Borrow short, lend long, speculate in complex OTC derivatives and collateralized dogshit debt, and then let the government bail you out every 10 years when you fuck it all up. Seems like almost anybody could manage that.
If you are not quite sure yet that it is chaos...
Let's just say that the forces that don't give a damn about Citi, don't trust Citi, and know that Citi is just another clown far outweigh anything Citi has to offer anyone.
Way too many of you are still duped in this stage of internia and denial.
Why? Because you have nowhere else to go.
Citi are traditionally tail risk traders. Probably the only major bank that bets on the risk.
AUD and Aust bonds are getting killed. Australia is facing a margin call.
Your comments are almost universally excellent, I pay attention when I see them.
I guess decrease in supply is POMO plan to decrease price? I don't see how the fiat is helped.. These suckers want some massive broken window war.. I don't think that helps with China one bit..Saudies payoff will backfire as Petro China is bigger than XOM... BIG BOY POLITICTS.
They did the same thing with houses. They do the same thing with everything.
it's not like there's more corn, wheat, soybeans etc being created here. and what is the price doing? getting hammered. say hello to the syndicate folks. i have no doubt once these mines go belly up they'll be bought for a song and simply "gifted" to the resource companies that stand to make billions no matter what the price of gold does.
T-minus 4.5 hours until the 40k contract dump in the thin gold futures market to get "the best possible price" .
I have been on the phone with several mining CEOs of late, and they all tell me (with the exception of fuel), costs are coming down. Mining services and drilling are in a depression. One exec told me only the kid analysts are following these companies now and their firms force them to use dated models.
http://winteractionables.com/?p=1306
Thanks russwinter.
I think the attack on the miners is part of the attack on gold and PM's; the banksters keep hoping to kill any investment in PM's whether it is physical, paper, or the miners themselves - to kill the psychology of their value.
i was just getting ready to say, why not put and end to this fucking speculation, and CALL a mining company...someone will eventually talk to you.
Thats the plan, man...have the pm miners go broke and bankrupt...guess who lendt them the money? Its cheaper per oz to buy a bankrupt miner than buy pms by the oz, lb, ton on the futures exchange
Looks like they don't make the stuff anymore. Pm squared.
term ...
"financially engineered resource grab"
comes to mind.
LOL at the desperate attempts to pump up the price with these stories.
long lines of peasants in China? fail.
JPM vaults? fail.
now, miners underwater? fail.
(PS: it costs a heck of a lot more to shut down a mine and restart it than it does to continue producing at a loss)
i'll see you all at <$1000/oz.
So you think reality is all just a big scheme to raise gold prices? I think you have discovered the meaning of life. God wants higher gold prices.
It costs nothing to shelve a planned project.
That's right, we used our secret Tesla earthquake machines to collapse the Kenecott mine too.
You are a paranoid conspiracy theorist.
Nothing to see here.
this Scene has been played out in Oil over and over and over and over ad infinitum.
only the weakest of companies MUST produce one more ounce of gold. They simply cut supply, hedge their ore and leases, and wait.
What banker cares about the flow of gold? Maybe the plan is to start starving the Indians and Chinese and release the stock. Americnas really don't have much stock as they've already traded it for igadgets.
If I'm not mistaken, the Saudis are the single largest shareholders of Citi.
It's not the US Taxpayer?
The Banksters are funneling money flows into US stocks... "There is no alternative, buy US stocks", the ones that Hank Blasted down to 666 so the chosen Bankers could run the table again and rebuild their ponzi empire in just a few years. Just ask Larry Kudlow, the falling gold price is signaling the "all clear" for the financial crisis. WTF, over.
when I here citi I always think London?
empire.
NEWSFLASH: Zerohedge readers underperform the S&P 500 by 25000 basis points.
On what timeline?
I'm afraid of miners like everybody else, but it must be time to buy. Unless Citi can explain how they think gold prices will stay lower over the next decade while supply gets crushed from all the mine closures?
I've been holding miners since before the big April smackdown. I didn't sell then, I bought more. They hit lower bottoms, still didn't sell.
In fact, I'd buy more if I could. Too bad I'm out of toilet paper.
Normal concepts of supply and demand mean nothing with gold. The amount consumed each year (mostly jewelry) and the amount produced each year by miners is trivial compared to the stored suppy. The price is determined almost solely by investor psychology. And the market is discounting inflation. Beware. The market is trying to tell you something. And its not saying "Keep stacking".
oh, you mean the massively manipulated 'market'?
newsflash sparky, i ain't gonna figure it out, but i do know it's a rigged game that we're not meant to win, so there is no way in fuck i'm putting wages into it.
"The price is determined almost solely by investor psychology."
And you expect that psychology to keep investors in stocks and bonds for how long, exactly?
You simultaneously totally get and totally miss the point. The difference between a piece of paper and a piece of gold is THERE IS NO DIFFERENCE. Its all psychology.
Yes true but I'll take 5000 years of psychological dedication and over 2 billion committed Asians over an unsustainable media propoganda machine.
there is no spoon?
'The price is determined almost solely by investor psychology.'
agreed.
especially if it's a headline reading algo.
p.s.
i think the 'market' is holding time, waiting until people forget that the market is selling only paper, not gold. may take a couple of years.
Most miners mine the low grade ores when prices are high so as to extend mine life and then switch to higher grades if the prices drops.
I do not see whee Citi gave that fact a nod????
No worries, you silver will be just fin......
oops, even woise than the barbaric!
When the price of barbaric gets you down , just go back and read the screeds posted right here, telling you that 5000 was coming and you'll feel a lot better.
I will be happy if it goes to $5000. This means I can short the worthless paper again, and use the paper profits to buy more gold later.
I will be happy if it goes to $0. This means for the first time in many years we'll have price discovery for the real thing. You say $0? So sorry, I'm the seller so I get to decide the price. Mine is $55.000.
Whatever comes, bring it on.
You guys were right, only you didn't know it. It WAS manipulated, UP!!!!!
Coming back to fair value, I'd say about 700 would do it.
Zzzzzzzzzzzzzzzzzzzzzzzzzz...
i still say it is between 1000 and 1200
You need lots of suckers willing to sell at $700 in order to sustain that.
Sooner or later you run out of suckers, then the bubble bursts.
Oh yes, it's a bubble. But you were looking at it upside down.
Btw how many ounces are YOU selling at $700?
Ok, we are more or less at or below break-even. Any common-sense approach would be to speculate we are at or near a fucking bottom here; I mean come on.
I am taking a 1/2 position in everything I like, starting with FCX tomorrow. The other half for the swoop below $1000 if we get to it. Blue chips. If I lose it all I will simply never trade again.
Gold is heading downward because we are headed for a world-wide Greatest Depression of all time. If the banks stop lending, there is no money. Investors will sell gold for cash.
Holding physical gold and physical CA$H is a smart bet.
you get it wrong. Banks are more than willing to lend and at a very low interest rates .The problem is - very few willing to borrow (because everybody knows you have to return the money back later on and it is problematic in this depressing environment)
6,000 years of gold as money and these Ivy-league pederasts think that they will put an end to that in order to eliminate the competition for their electronic/fiat money? Fucking arrogance.
As kids, they were told that paper beats rock. This is why they got confused.