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Top gold miners record decreased all-in sustaining costs in Q3'20

All-in sustaining costs dropped for nine of the 15 larger gold producers in the third quarter, according to an analysis by S&P Global Market Intelligence that assessed companies with 2019 attributable gold production exceeding 500,000 ounces.

The median all-in sustaining cost, or AISC, decreased 2.6% to $966 per ounce of gold across the group as compared to the previous quarter, while the weighted-average mean dipped 1.5% to $990/oz. Costs increased in the second quarter, with the weighted-average mean up 2.5% to $987/oz.

Among the top gold miners, Centerra Gold Inc.'s AISC fell the most, dropping 34.3% to $528/oz quarter over quarter. In reporting third-quarter earnings, the Canada-based company cited increased gold prices, lower diesel prices and currency devaluations as working in its favor.

After Centerra, Agnico Eagle Mines Ltd. and Newmont Corp. followed in terms of decreased AISC, down 11% and 7% to $1,016/oz and $1,020/oz, respectively.

Mining companies with significant cost increases in the September quarter included Evolution Mining Ltd., Kirkland Lake Gold Ltd. and Newcrest Mining Ltd., with AISC rising over the second quarter by 19.7%, 18% and 11.6%, respectively, to $857/oz, $886/oz and $980/oz.

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The median profit margin for the group was 48.3%, and the weighted-average mean was 43.8%, according to the analysis. Centerra had the highest profit margin at 70.8%. Harmony Gold Mining Co. Ltd. recorded the lowest profit margin at 21%. South Africa-based Harmony Gold completed a $300 million acquisition of mining assets in late September.

Overall, profit margins in the third quarter were higher than in the first and second quarters of 2020 as well as the fourth quarter of 2019.

Balance sheet strength has driven many gold miners to lift dividends as they look to share free cash flow with investors. Newmont increased its dividend by 60% in the third quarter, Agnico Eagle raised its dividend by 75%, and Kirkland Lake boosted its dividend by 50%.

Gold mining executives underscored dividend policies during third-quarter earnings calls, with some stressing a commitment to paying out more to shareholders on the back of strong gold prices.

Gold production among larger gold miners rebounded significantly in the third quarter after shutdowns related to the COVID-19 health crisis earlier in the year. The five largest gold producers saw output increase 10% in the third quarter over the second quarter, according to a recent Market Intelligence research report.

Still, cumulative gold production in the third quarter was 5% lower year over year, in part due to changes to Newmont and Barrick's production profiles.

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