Weak gold price will affect K92 Mine operations: Lewins

 THE plummeting global gold price means mining companies in the country will cut back non-essential expenditure impacting suppliers, K92 Mine Inc says.

Chief executive officer John Lewins was responding to queries from The National regarding current gold prices.

K92 Mining Inc Photo /Twitter

He noted that at the beginning of this year, the gold price started at around US$1,950/ounces (K6,694.49/oz) but had dropped to be around US$1,730/oz (K5,939.21/oz).

He said the mines might defer capital and expansion projects impacting employment growth and production growth.

“Any movement in the gold price affects the gold mines in PNG,” Lewins said.

“The average ‘all in sustaining cost’ of production for PNG mines is around US$1,000/oz (K3,433.07/oz) to US$1,100/oz (K3,776.38/oz), so at current prices all the mines in PNG are still operating with good margins.

“Lower margins, mean lower profits, less tax to Government, less money spent on exploration and capital and lower royalty payments to communities and Government.

“The other point to note is that the Australian dollar has strengthened against the US dollar, so the gold price in Australian dollars has dropped even more, from AU$2,700 (K7,177.11) late last year to currently AU$2,100 (K5,582.20).

“Given that a lot of the costs incurred by PNG gold mines are in Australian dollars, this is probably more important than the US dollar price movement.”

Lewins said the gold price would remain under pressure for the first half of this year, but potentially recover somewhat over the second half of the year.

“Much depends on the performance of the US economy and others, following the shutdown caused by the Covid-19 pandemic,” he said.

The decrease in the gold price over 2021 is due to a number of reasons:

  • A DECLINE in physical demand for gold by central banks;
  • JEWELERRY sales have been disappointing as the Covid-19 pandemic suppressed customer activity;
  • A “lack of interest” from investors in buying gold has also been a pressure point for the market;
  • A NUMBER of hedge funds have been selling gold;
  • THE US dollar has strengthened, which generally means that the gold price weakens; and;
  • INCREASING interest in other investments such as Bitcoin.

“It should be remembered that the gold price is still at a very high price relative to the average price over the last five years,” Lewins said.

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