Rising Oil Prices and Mining Industry Challenges

Strategic Insights -

Rising oil prices are having a significant impact on mining companies worldwide, including Newmont Mining Corp., which has estimated that the costs will increase by as much as $30 million at its massive copper and gold mine in Indonesia. This comes as other miners, such as Barrick Gold, are sticking to their initial 2005 production and cost guidance. Meanwhile, Australia's Croesus Mining N.L. is aiming to more than double its output in the next four years through organic growth and potential mergers and acquisitions. The global gold market is also experiencing increased demand, particularly in India, where heavy rains are expected to boost physical off-take.

Key Takeaways:

  • Newmont Mining Corp. estimates that rising oil prices will increase costs by up to $30 million at its Indonesian mine.
  • Barrick Gold is the only senior North American gold miner to stick to its initial 2005 production and cost guidance.
  • Australia's Croesus Mining N.L. aims to more than double its gold output to 500,000 oz in the next four years through organic growth and potential M&A activity.
  • India's monsoon season is expected to boost physical gold demand as heavy rains will make it easier to transport gold.
  • Barrick Gold posted a 56% increase in earnings in the second quarter, driven by a higher realized gold price and lower interest and amortization expenses.
  • Australia's Croesus Mining N.L. reported a decline in gold output to 183,020 troy ounces for the year ended June 30, down from 236,760 oz in the previous year.
  • Precious metals settled mostly higher at the New York Mercantile Exchange, with gold and silver futures reaching their highest levels of the month.
  • China's spot gold market ended higher, driven by commercial bank buying following an international rally in gold prices.

Statistics:

  • Newmont Mining Corp estimates that rising oil prices will increase costs by up to $30 million.
  • Barrick Gold's second-quarter earnings increased by 56%.
  • Croesus Mining N.L. reported a decline in gold output to 183,020 troy ounces in the year ended June 30.
  • Gold futures reached their highest levels of the month at the New York Mercantile Exchange.
  • China's spot gold market saw commercial bank buying following an international rally in gold prices.
  • The Shanghai Gold Exchange saw spot gold trade end higher on Monday.

Sources:

  • Dow Jones Commodities News via Comtex, "Newmont: Oil Prices Will Hurt Profits At Indonesia Mine"
  • Dow Jones, "Barrick Gold Alone In Keeping Prod, Cost Guidance"
  • Dow Jones, "DJ INTERVIEW: Croesus Targets 500,000 Oz Gold, M&A Possible"
  • Dow Jones, "FOCUS: India Monsoon May Boost Gold Demand - Analysts"
  • Dow Jones, "Barrick Gold 2Q Net Jumps On Higher Gold Price"
  • Dow Jones, "Australia's Croesus FY Gold Output Falls To 183,020 Oz"
  • Dow Jones, "NY Precious Metals Review: Gold, Silver End Higher"
  • Dow Jones, "China Spot Gold Ends Higher; Bank Buying On International Rally"