The number of gold miners cutting asset values is starting to become a flood.
Newcrest (NCM) started it with a $US4 to $US6 billion effort, Newmont Australia wrote off around $1.6 billion. Kingsgate Consolidated (KCN) wrote off $300 million in late June, now increased to around $320 million, Resolute Mining (RSG) cut $70 million and Evolution Mining (EVN) on Monday revealed a cut of up to $400 million on the value of its gold mines.
Analysts reckon some $US15 billion has been written off gold mines around the world in the past couple of months.
Yesterday, Alacer Gold (AQG) became the latest miner to confess to having over-valued assets and revealed a $412 million cut to the value of its two Australian mines located around Kalgoorlie which are on the market.
That’s nearly $7 billion in write-downs in that handful of companies alone, thanks to the 25% slide in the world gold price since April.
AQG 1Y – Alacer Joins The Impairment Club
Alacer is reported to be still profitable due to its younger, growing Turkish Copler mine which the company said produced 68,195 ounces of gold for the quarter.
Alacer reported a 14% drop in its average gold price in the quarter to $US1,394 an ounce for the three months to June 30.
"The reduction in the value of the Australian assets has largely been driven by the significant decrease in the gold price and associated market sentiment during the first half of 2013," the company said in a statement.
The Australian side of the business had lost $48.5 million during the quarter, it said, but nearly $22 million of that was due to adverse foreign exchange movements as the Aussie dollar fell against the US greenback.
The company was formed in the 2011, $2 billion merger of Canada’s Anatolia Minerals Development and ASX-listed Avoca Resources and traded around $11 at the time. Yesterday its shares rose 5c to $2.81, so big losses for all involved despite that small improvement.
Alacer said that the two mature Australian mines produced 41,622 ounces in the quarter, but costs jumped sharply. As a result cash flows at the two mines – Higginsville and South Kalgoorlie – had been adversely affected.
Reasons for a 221% jump in costs were low levels, high operating costs, and capital expenditures as well as economic factors such as lower gold prices.
Alcaer, which is headquartered in the US said that "In view of the Corporation’s decision to pursue the divestment of its Australian assets and the lower more volatile gold price environment currently prevailing, the Corporation has recognised a non‐cash impairment loss of $412 million resulting from the re‐measurement of Australian assets to fair value less costs to sell".
Alacer shares rose 5c to $2.81, a gain on 1.8% on a day when the market was all but flat.
And rare good news update from the mining services sector, with Sydney-based WDS revealing how improved earnings from its energy business has offset the slide in mining services.
That news saw the small company’s shares jump by more than 24%, or 9c, to end at 45c. It was positive news from a sector that has been battered by the slide in mining in the past four month, which hasn’t has the same amount of impact on the oil and gas businesses.
WDS YTD – Rare good news from mining services
WDS said yesterday it now expects net profit after tax (NPAT) for the year to June "to slightly exceed the upper end of its February guidance range of $6 to $8 million".
"Revenue for FY13 is now expected to be in the range of $350 to $355 million, compared with the Company’s previous guidance of $330-350 million.
"As foreshadowed in February, the close – out of major contracts and the ramp-up of the APLNG contract have positively impacted cash flow for the year. Improved earnings from the Energy Division have more than offset a continuing weak earnings performance by the Mining Division.
"With significant cash receipts in July, WDS advises that it has commenced the new financial year with a balance sheet that is unguarded and today has net cash in excess of $20 million.
"This provides the Company with opportunities for growth and considerable flexibility to explore its capital management options with the aim of increasing returns to shareholders over time. A review is currently underway with the expectation that further detail will be provided at the Company’s results briefing on 28 August 2013," directors said.
And, according to CEO Terry Chapman, WDS has found that. "achieving completion on a number of projects has removed some of the uncertainty impacting our earlier guidance and this, together with increased revenue from major projects in recent months, has resulted in this positive revision to our guidance.
“We are pleased that the diversity of our business model is continuing to bear fruit in what is a very challenging coal market for our underground Mining business. Considerable effort has been made to ensure our balance sheet remains strong and we are pleased to see this effort pay off.
“WDS has begun the 2014 financial year with cash in hand, which positions us well for future growth. More importantly it provides us with flexibility to consider our options for improving returns to shareholders on a sustainable basis. We look forward to updating the market in more detail when we announce our Full Year results on 28 August,” he added.
