December 1, 2016

#Gold companies: Where is the breakeven point to create Free #CashFlow

"In 2017e the average Mid-Tier/Intermediate and Junior gold producers will need US$1,124/oz and US$1,199/oz (Alacer outlier removed) respectively to cover all of their costs, including development capex."

 

Source: Scotiabank GBM Precious Metals Research

 

After a euphoric few months, analysts are back where the market has been a year ago, figuring  out free cash flow (FCF) breakeven points for gold companies. As the Table for Scotiabank outlines, intermediate gold companies need on average US$ 1,124 per ounce and junior gold companies (excluding Alacer Gold) US$ 1,199 per ounce to break even in 2017.

 

In 2017e the average Mid-Tier/Intermediate and Junior gold producers will need US$1,124/oz and US$1,199/oz (Alacer outlier removed) respectively to cover all of their costs, including development capex.  

 

A key item that will be carefully watched by Scotiabank's entire precious metals research team will be looking for with companies' 2017 guidance is the potential of a rising sustaining capex outlook.  The key question is how many companies cut sustaining capital over the past few years and will now have to "catch-up" on this front? 

 

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