Brace for impact, Fools. For those with investments in the mining sector, the fourth quarter is shaping up to be a minefield for gold miners.
Gammon posted an excruciatingly high cash cost per gold equivalent ounce (GEO) of $735 for the latest quarter, canceling out one of the company's highest production figures ever. Several factors conspired to press costs higher, including a less favorable ratio between the prices of gold and silver, and restructuring costs associated with a workforce reduction of 254 employees at the El Cubo Mine.
Whereas Yamana Gold
Gammon certainly does not stand alone in reporting significant cost increases. Even economies of scale couldn't prevent costs from climbing to near $500 per ounce for megaminers like Newmont Mining
I expect dismal metal prices in the fourth quarter to hinder byproduct credits for all miners; the entire group should feel substantial cost pressure until conditions improve. Based upon Gammon's current cost profile, I must suggest that Fools keep digging for better bargains within the gold patch.
Five-star Motley Fool CAPS pick Gammon Gold boasts 197 faithful fans who expect the stock to outperform. Whether you agree or disagree, this friendly community of investors would like to know your thoughts. All levels of expertise are welcomed.
Fool contributor Christopher Barker still thinks Gammon's long-term prospects are strong. He can be found blogging actively and acting Foolishly within the CAPS community, under the username TMFSinchiruna. He owns shares of Agnico-Eagle Mines, Gammon Gold, and Yamana Gold . The Motley Fool has a gilded disclosure policy.