Major gold miners' Q2 2023 all-in sustaining costs rise 4.8% QOQ

Large gold miners booked higher production costs in the second quarter of 2023, impacted by reduced output and sustained inflationary pressures, according to S&P Global Market Intelligence data.

All-in sustaining costs (AISC) rose for nine of the 13 analyzed gold miners in the second quarter, and the weighted-average mean across the group increased 4.8% to $1,333/oz, compared with the previous quarter. The analysis comprised gold producers with more than 500,000 ounces of attributable 2022 production that reported output and AISC for the quarter.

Labor cost pressures

Gold miners have seen cost inflation start to ease in 2023, after their input costs jumped in 2022 due to Russia's invasion of Ukraine and supply disruptions during the COVID-19 pandemic.

Newmont Corp., the largest gold miner by production in the analysis, reported a 7% quarter-over-quarter increase in AISC to $1,472/oz, mainly driven by lower production volumes.

Labor costs for employees are stabilizing, particularly in Australia, Canada and the US, Thomas Palmer, Newmont's president and CEO, said in a July 20 earnings call. Contracted services costs have stabilized at a higher level than last year, with some easing possible in the second half. About half of the miner's cost base is labor, split roughly evenly between employees and contractors, Palmer said.

Declining natural gas and diesel prices have helped ease the cost of materials and consumables, which is expected to continue in the second half of the year, Palmer said.

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Evolution Mining Ltd. booked the biggest increase in cost among the analyzed gold producers. The Australia-headquartered company's AISC jumped 44.7% to $1,277/oz, largely due to reduced gold production after heavy rain halted operations at the Ernest Henry gold-copper mine in Queensland, and high labor costs. "Labor, including contractors, is almost half of our cost," Barend Johannes van der Merwe, Evolution Mining's CFO, said in an Aug. 17 earnings call. "The labor market remains tight, and we expect labor costs to increase by around 5% to 6% in FY'24."

Canada-based Iamgold Corp.'s AISC rose 27.9% to $1,912/oz in the second quarter, the highest cost among analyzed gold miners. CEO and President Renaud Adams attributed it to "increased cost of lending supplies, including fuel, higher power costs and previously forecasted lower grade at Essakane, as well as an increased rehabilitation cost [related to] Westwood."

Average profit margin slips

Four mining companies slashed production costs during the quarter, with Equinox Gold Corp. reporting the biggest decline of 9.4%, followed by Northern Star Resources Ltd., AngloGold Ashanti Ltd. and Barrick Gold Corp.

The 13 miners' average profit margin slid to 29.8% in the second quarter from 31.6% in the first quarter, given lower average realized prices.

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