DRC’s gold mining in troubled times
Mineral commodity prices have all fallen this year, and gold is no exception. But because gold, unlike other minerals, is perceived as a safe haven when other assets are going belly up, its price has not performed in quite the same way.
The average price of copper during the first half of 2015 was 15% lower than a year earlier and the metal has kept falling since, hitting a six-year low of $5,000/tn in August.
The gold price kicked off the year, meanwhile, at $1,184/oz, peaked 3.4% higher in mid-May, bottomed out 9% lower in late July when rumours of an interest-rate hike at the US Federal Reserve were at their loudest, and has since then climbed gently upwards, in part due to panic induced by a meltdown in Chinese stocks. At the end of August, the gold price was $1,134/oz – more or less where it was when the year began.
Recorded gold production in the DRC during the first six months of 2015 was 26.2tn, 57% higher than during the first six months of 2014 – a testament to rising output at the country’s two industrial mines. Unrecorded, smuggled gold production, meanwhile, which is largely artisanal, probably reached 7-10tn over the same period.
Randgold Resources operates the Kibali gold mine in a remote part of north-east DRC, in the newly established province of Haut-Uele. The mine produced 328,647 ounces of gold during the first half of 2015, more than half its 600,000-ounce target for the year, at an average cost of just US$582/oz.
This has kept profits healthy – the company recorded a $93m profit from Kibali during the first half of 2015, up sharply from the $61.6m profit recorded during the first half of 2014. The company boasts, too, that it is well on track to commence underground mining next year.
Stock market woes
The only other industrial gold miner active in the country at present is Toronto Stock Exchange-listed Banro Corporation, which operates the Twangiza mine in South Kivu and – very soon, the company claims – the Namoya mine in Maniema.
Gold production at Twangiza was 70,268 ounces during the first half of 2015, significantly higher than the 41,568 ounces realised during the same period in 2014, a year that was blighted by multiple, expensive technical hitches, while the company’s production cost fell from $794 to a much better $643/oz.
Banro is still incurring significant costs to get Namoya going, and the company has reported that it is losing money. The impact can be seen on the Banro share price, which was just $0.18/ share in September.
Despite its much stronger numbers, Randgold’s share price has suffered too this year, falling from $85.46/share in early January to just $58.52/share in early September. So bearish is investor sentiment towards commodities right now, it seems, that everyone is getting hammered.