Newcrest Mining (NCM) is Australia’s largest gold producer and one of the world’s top five gold mining companies by production, reserves, and market cap.

NCM’s main operations are in Australia, Indonesia, Papua New Guinea, Fiji and West Africa. The group’s flagship mine is PNG-based, Lihir, with the other offshore operations being Gosowong in Indonesia, Hidden Valley (50%-owned) in PNG and Bonriko in Ivory Coast.

NSW-based Cadia Valley and WA-based Telfer make up the company’s domestic operations.

Gold price plunge

Gold holdings at exchange traded funds (ETFs) have fallen significantly in 2013, with the drop in bullion holdings reflecting a dramatic fall in investment demand.

The plunge in gold prices has encouraged China and India, as well as the US and Perth Mints, to ramp up their physical purchases of bullion. However we believe the surge in ETF-related supply is overwhelming any physical demand for the precious metal.

The spot gold price has plunged 16% in the year to date amid a sharp deterioration in sentiment towards the precious metal. Global inflation remains low whilst the US central bank has flagged an end to its monetary stimulus measures sometime this year in response to a strengthening US economy.

We expect these headwinds to persist for a while yet, resulting in an environment where any short-term gain in gold prices is met by even stronger selling.

Higher cost mines threatened by gold

NCM is one of the higher cost gold producers in Australia. Cash costs were $1086 an ounce (oz) for the March 2013 quarter, with a number of its mines plagued by operational issues.

Telfer, which accounts for a quarter of overall production, had cash costs of $1162 an ounce.

This was 27% higher than the previous quarter due to weaker copper output, planned mill shutdowns and the sourcing of ore from higher cost open pit sources.

The group’s offshore mines, Gosowong, Hidden Valley and Bonriko, contribute around 20% of overall production. Cash costs at these mines were $806/oz, $1790/oz and $930, respectively.

With gold prices currently trading around $1400/oz, Hidden Valley has become uneconomical and Telfer’s cash margins are very tight, magnifying the threat of impairment charges at these mines.

Outlook

A major problem for NCM and other higher cost gold producers is the impact plunging gold prices are having on mine profitability. Mine shutdowns and weaker output contributed to a big rise in quarterly cash costs at Telfer, whilst Hidden Valley has become uneconomical given how much cash costs exceed current gold prices.

We believe there is more weakness in store for gold prices, raising the threat of write-downs at NCM’s high-cost mines.

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St. Barbara Ltd (ASX:SBM) is a gold exploration and production company.  The Company’s exploration projects include its Southern Cross and Leonora Operations which are located in Western Australia.

ASX Small Cap stock, St Barbara today released production figures for the fourth quarter revealing a production increase of 18% compared to the previous quarter.

The company said in a statement that the increase was due primarily to stronger milled volumes and the higher grade of ore mined.

SBM said exploration drilling will increase in the second half with the exploration budget set to increase by $6 million for the year to $22 million.

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Saracen Mineral Holdings Ltd (ASX:SAR) is an Australian mid-tier gold producer based in WA.

The company bought its major assets off Sons of Gwalia back in 2006 – when the latter went bankrupt – and has done well to develop the assets and move from an explorer to a producer.

SAR’s key assets are located in the South Laverton mining district, 120km North-East of famed gold mining town Kalgoorlie, in Western Australia. This includes around 200 granted tenements and applications pending spread over 2,500 square kilometres.

Since purchasing these assets, SAR has spent money exploring the tenements and developing the projects to production.

The company completed a Definitive Feasibility Study on the South Laverton gold project in December 2008 and started producing gold in early 2010.

Ramping up

Having started production in April last year, SAR has achieved strong production quite quickly and established itself as an enticing small producer.

The company produced 111,163 ounces of gold in FY11, its first full year of production, at an average cash cost of $738 an ounce.

SAR has forecast production of around 125,000 ounces in FY12 at costs of around $700-$750 an ounce. So far FY12 is off to a solid start, with the company recently releasing its September quarter Activities Statement. Production of 31,790 ounces at cash cost of $730 was right in light with guidance.

By de-watering some of its flooded pits, SAR hopes to ramp up production to over 160,000 ounces a year by 2015.  Management has proven to be conservative and reliable so far, offering some reassurance in what is a speculative sector.

Saracen Mineral Holdings has managed significant upgrades to its gold resources and reserves, presently standing at around 3,300,000oz and 880,000oz respectively.  Most of the reserves are open-pit, which allows for easier and cheaper mining.

The sizeable resources and potential underground mining pave the way for a long mine life, while the company has extensive exploration potential to upgrade this further.

The hunt for Red October

SAR’s has planned to spend $35 million on exploration activities in FY12, a sizeable budget given the size of the company.

The company recently completed a placement, raising $50.2 million and helping the company to end the September quarter with $60.3 million in net cash and no debt. A share purchase plan and subsequent placement have raised a further $15 million since.

Together with cash generated from production (almost $10 million last quarter), SAR will not need to raise significant fresh capital to fund this.

Much of SAR’s exploration efforts will be in exploring its Red October project. The company expects to have completed dewatering the pits shortly, to be followed by underground development work.

Previous drilling results have confirmed the continuity of ore body at Red October and further exploration efforts could lead to significant resource upgrades relatively quickly.

Production from Red October is expected to commence in FY12, but potential major exploration success could provide a major share catalyst before then.

Outlook

SAR only started gold production just over 18 months ago but is already generating output of around 125,000 ounces a year.

Incremental production upgrades could come in the next few years, but the significant upside potential comes from the development of its Red October operation.

While SAR offers significant exploration upside, its existing production provides extra protection, and suggests that the market could re-rate the stock and push SAR shares much higher than current levels.

SAR is a defiantly a stock to watch.

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Azimuth Resources (ASX:AZH) is a junior gold and uranium explorer, with projects based in Guyana and South America.

The group holds approximately 8000km² of gold tenements in Guyana, and its main asset is the West Omai gold project, which it is currently exploring.

AZH’s other interests are the East Omai gold project, the Amakura uranium project, and the Pandanus West uranium project in Australia.

The company is an exciting prospect that has produced encouraging drilling results at West Omai. There is growing hope that the group’s maiden resource discovery will be significant enough to help underpin the start of production.

Go Guyana

The West Omai project is AZH’s flagship project, and which may contain the discovery of significant gold resources.

West Omai is part of the same corridor that hosts the Omai gold mine, which is the biggest gold mine in South America, having so far produced 3.7 million ounces of gold.

Azimuth Resources is expected to release a maiden resource estimate from the project sometime this quarter.

Given West Omai’s proximity to the Omai gold mine and the encouraging drilling results thus far, a significant resource discovery could be on the cards.

Gold shoots higher

Being an explorer, AZH is tightly leveraged to gold prices.

Although gold was sold-off heavily in September, the precious metal has bounced back strongly in recent weeks amid global economic uncertainty.

The spot price of gold is back above US$1750 an ounce after crashing to just above US$1500 in late September.

Europe’s debt crisis and the potential for another round of bond purchases by the Fed is likely to lure more nervous investors back into gold, which is likely to support prices further.

Such an outcome would be very beneficial for AZH.

Balanced out

AZH completed a $19.4 million capital raising on 31 October, giving it the balance sheet strength to pursue its Guyana exploration program well into 2012.

The raising has come at an ideal time for AZH, which has smartly taken advantage of its strong share price to shore up its finances.

The group also announced plans in April 2011 to list on the Toronto Stock Exchange.

The listing is expected to boost AZH’s global profile, which will come in handy when the group looks at future capital raisings.

Outlook

AZH an exciting prospect that has produced encouraging drilling results at its West Omai project.

The group is expected to release a maiden resource estimate from the project sometime this quarter, and there is hope the estimate will be significant enough to help underpin the start of production.

AZH’s fortunes are closely linked to the price of gold, and with the precious metal on track for continued gains, we believe this will translate into continued strength for AZH’s share price.

This is one of the hot stocks of the year, rising from 25 cent in June to currently be trading beyond 50 cents.

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Regis Resources Limited (ASX:RRL) is an emerging Australian gold production and exploration company.

Its management team has a successful track record of developing mid sized gold operations within Australia and Africa.

It has been one of the hot shares in the past year, having more than tripled in price since July 2010.

Today, RRL reported a maiden FY12 net profit of $36.3 million.  The result compares to a net loss of $18.3 million in FY11.

The group posted gold sales of $107.9 million as it successfully transitioned from explorer to producer.

RRL said the development of the Garden Well Gold Project will take its output to around 350,000 ounces in FY12/13.

Therefore it will be one of the shares to watch.

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Resolute Mining (ASX:RSG) is a gold mining and exploration company, operating primarily in Africa and Australia.

It is the second largest gold producer by volume listed on the Australian stock exchange.

The group has a portfolio of three operating mines in Africa and Australia.

Its three operating mines are: Golden Pride in Tanzania, Ravenswood in Queensland, and the newly re-developed Syama in Mali, which was once a BHP Billiton operation.

RSG’s operations are well-placed, and exploration is likely to lead to further resource discoveries, underground, and in nearby pits.

Being unhedged, RSG continues to benefit from a boom in gold prices.

Doubling exploration budget

RSG today announced an annual group exploration budget increase to $20 million in FY12, from $10 million in FY11.

The news comes after RSG identified some high priority exploration targets at Syama in Mali and Ravenswood in Queensland.

RSG has a strengthening balance sheet on the back of operating improvements at Syama.

Results from current exploration at both projects will be provided in the miner’s June Quarter Report.

It is targeting an increase in production from its flagship Syama project to 250,000oz of gold a year after an extended ramp-up and commissioning period

Golden update

Last month, RSG provided its Group gold production and cash cost guidance for FY12.

Gold production in the coming year is forecast to increase to 410,000 ounces at a cash cost of $730 per ounce.

This cements RSG’s position as the second largest primary listed gold producer on the ASX.

It also represents a substantial increase in production and reduction in cash costs.

RSG’s continued improvement in outlook is underpinned by ongoing progress being achieved at the Syama operation in Mali.

The miner’s shares surged 7.6% on the day of the announcement.

Looking ahead

RSG could be debt free by the end of December should existing share options and convertible note debt be converted to equity.

The miner has a highly prospective tenement package with the potential to add significant value for shareholders.

Gold has gained significantly this year, reaching fresh record highs this week as global economic uncertainty pushes investors towards the safety of the shiny metal.

The metal printed highs of around US$1610 this week and continues to hold its ground well above US$1500.

Following the recent production and reserves updates, RSG seems well placed to benefit from the surging gold prices so it will be one of the stocks to watch in coming months.

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Newcrest Mining (ASX:NCM) is Australia’s largest gold producer, with mining and exploration projects in Australia, Papua New Guinea (PNG), Indonesia and the US. The miner also has a smaller exposure to copper, mostly as a by-product of its gold production.

The company is also considered among the market’s blue chip stocks by virtue of its size and performance.  Furthermore, due to its leverage to rising gold prices, NCM has been one of the hot stocks over the past month.

NCM reported its latest quarterly production numbers yesterday.  The results showed a 16% decline in gold output from the previous quarter.

Gold output was hit by wet weather events in eastern Australia, low rainfall which hurt production at Lihir, and civil unrest in the Ivory Coast leading to the suspension of operations at Bonriko.

As a result, NCM said cash costs for the quarter rose from $440 to $497 per ounce.  Newcrest Mining also downgraded full year gold production guidance to 2.82 million ounces (plus or minus 35,000 ounces).

This compares to previous guidance of between 2.85 million and 2.95 million ounces.

Copper production guidance was left unchanged at 75,000 – 80,000 tonnes, with cash cost guidance also remaining the same.

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Northern Star Resources (NST) explores and develops mineral resources in the highly prospective Kimberley region.

NST is an emerging gold producer and explorer with a market capitalisation of around $120 million.  Its main project is the Paulsens gold mine which it purchased for $40 million.

NST has been one of the hot shares in recent months, more than doubling its share price since last August.

The miner expects to release a resource upgrade later this month and a new mine plan for Paulsens this year.

NST recently acquired the 668,000 ounce (oz) Ashburton Gold Project which is close to the Paulsens mine.

Ashburton acquisition

NST agreed to purchase the Ashburton Gold Project from Sipa Resources which will be paid for via a royalty on future production.

The deal includes 668,000oz resource and the Mt Olympus Gold Mine, which has previously produced 340,000oz.

This puts NST in a prime position to increase production rates, project life and create shareholder wealth through exploration.

Ashburton is a strategic asset for NST as it provides an immediate resource boost to the miner’s resource base.

Bright future

The miner is debt free after paying a final $2.5 million production royalty on the Paulsens gold mine acquisition.

Paulsens produced a record 48,559 oz in the December half, generating revenue of $65.4 million.

Cash costs for the half were $510 per oz which is low when compared to other Australian gold miners.

Northern Star Resources repaid the $40 million acquisition of Paulsens in just seven months.

Resources at Paulsens currently stand at 128,700 oz. Added to the Ashburton resource, the total resource from the two is 796,700oz.

Current production is 6,000oz per month which brings in revenue of approximately $8 million per month.

Being unhedged, NST has maximum exposure to the surging gold prices.

Its exploration program at Ashburton is well underway and could deliver a significant resource upgrade as early as this month.

With strong cashflow and a robust balance sheet, NST is in a good position to grow.

Outlook

Gold has gained over 30% this year, reaching fresh record highs this week as tension in North Africa and the Middle East pushes investors towards the safety of the shiny metal.

The metal printed highs of around US$1440 this week and continues to hold its ground well above US$1400.

NST’s strong financial position leaves it well placed for further acquisitions in line with its objective of building a major mining house.

The miner is likely to announce a resource upgrade this month which would give it further upside.

With the potential for further acquisitions and strong gold prices backing the unhedged miner, it will be one of the stocks to watch in coming months.

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