Eldorado Gold Corp said on Tuesday it will cut 2013 capital spending by 35 percent and push back the start of various projects, making it the latest producer to curb spending in response to low gold prices.
Eldorado, a mid-tier producer that owns mines in Turkey, Greece and China, said its operating plan now assumes a gold price of $1,250 an ounce for the foreseeable future.
Gold has fallen 22 percent, or nearly $400 an ounce, so far this year. It was below $1,300 an ounce on Tuesday.
The sagging bullion price has already prompted many producers to shelve projects, reduce overhead and put non-core assets on the block.
“It’s hard for companies to cut enough costs to make up for the decline in the gold price, it’s dropped so much,» said Kerry Smith, an analyst with Haywood Securities. «I think you’ll see some production start to come off.”
The world’s largest gold miners have yet to idle production, but many have been quietly shopping around non-core assets and putting off expensive new projects.
Last month, top producer Barrick Gold said it was slowing construction at its controversial Pascua-Lama project on the border between Chile and Argentina, reducing spending on the project by $1.5 billion to $1.8 billion through 2014.
Barrick is also looking for a buyer for its high-cost subsidiary African Barrick Gold Plc.
For its part, Eldorado said the lower gold price means it will have to bump back the start dates for three of its European development projects – Skouries and Perama in Greece and Certej in Romania – by at least a year, into 2016 or 2017.
The company also said it continues to work on an amended environmental assessment to expand its Kisladag project in Turkey, but «the full Kisladag expansion as envisaged will be deferred pending improvement in metal prices.”
Eldorado now plans to spend $430 million on capital projects in 2013, down from a previous estimate of $670 million. The company also revised down its exploration spending to $51 million from $98.5 million.
Gold prices rose steadily for more than a decade through the 2000s, hitting a record above $1,920 an ounce in 2011. That bull run prompted miners around the world to expand output rapidly, bringing new mines online and driving up costs.
But as bullion softened in 2012 and then plunged this year, those same miners have struggled to rein in operating and capital budgets.
Producers are likely to now focus on higher-grade ounces, which could curb overall output. Smaller producers, especially those with just one or two small mines, could be forced to shut down entirely.
Junior gold miner QMX Gold Corp said on Tuesday it is suspending development work at its Lac Herbin mine in the province of Quebec but will continue to process ore from existing operations at its Aurbel mill.
With gold producers set to start reporting quarterly earnings next week, investors will focus on cost-cutting efforts and deferrals, RBC Capital Markets analyst Stephen Walker said in a note, which also highlighted the difficulty of selling assets in the current market.