Low costs help cushion Chinese gold producers

Gold prices might have further to fall but Hong Kong-listed gold miners could escape the closures of some overseas counterparts thanks to low production costs, analysts said.

About 15 per cent of the world's gold miners became unprofitable after the metal's price fell to levels close to the global average production cost of US$1,200 an ounce, Bloomberg quoted Tyler Broda, a London-based gold analyst at investment bank Nomura, as saying.

Petropavlovsk, a London-listed gold miner in Russia, was considering suspending lower-priority investments and cutting back on exploration spending should prices stay weak, chairman Peter Hambro told the news agency.

A gold equities analyst in Hong Kong told the South China Morning Post that Hong Kong-listed mainland gold miners could expect lower profit margins given the weaker price outlook, but because their production costs were low, the price drop should not affect this year's production plans.

Fujian province-based Zijin Mining, China's biggest listed gold miner, said last month its cash production cost averaged US$557 an ounce, which it said was the lowest of the world's top 10 producers. It planned to boost its mine-produced gold output 2.9 per cent to 33 tonnes this year.

Chairman Chen Jinghe said its unit cash cost surged 39.7 per cent last year because of lower ore grades at its mainstay Zijinshan mine.