Gold, silver mining impairments top US$8bn

Latin America's gold and silver miners recorded post-tax impairment charges totaling more than US$8bn in 4Q15.

The figure, compiled by BNamericas from company reports, is a sharp rise from the US$5.31bn seen in 4Q14 (US$3.69bn for gold and US$1.62bn for silver miners), and comes on the back of further price weakness.

The vast bulk of the write-downs relate to mines owned by the region's three biggest gold miners, Goldcorp, Barrick Gold and Yamana Gold.

Gold and silver hit six-year lows of US$1,049.40/oz and US$13.71/oz, respectively, in December, with many companies making downward adjustments to their long-term price outlook when valuing their assets.

Prices have improved to above US$1,200/oz and US$15/oz in 2016.

 

BARRICK GOLD – US$2.60bn

Barrick's goodwill and asset impairments relate to its Pascua Lama project on the Argentina-Chile border, and its Pueblo Viejo mine in the Dominican Republic, a 60:40 JV with Goldcorp.

The company assumed gold prices of US$1,000/oz in 2016, perhaps overly pessimistic given the metal's recent strength, and US$1,200/oz long-term.

GOLDCORP – US$2.47bn

More than half of Goldcorp's write-downs were at its Mexican properties, with US$565mn at Los Filos, US$500mn at Peñasquito and US$265mn at the Camino Rojo project.

The remainder was at Pueblo Viejo (US$610mn), Marlin in Guatemala (US$220mn), Project Corridor in Chile (US$200mn) and US$107mn at Alumbrera in Argentina. Latin America's biggest gold miner used a US$1,100/oz long-term gold price.

YAMANA GOLD – US$1.76bn

Yamana's write-downs were shared between seven mines and properties, with the biggest at Mercedes in Mexico (US$391mn), Gualcamayo in Argentina (US$371mn), El Peñon in Chile (US$339mn) and its Argentina exploration properties (US$336mn).

The company cut its long-term gold price assumption to US$1,250/oz from US$1,300/oz.

OTHERS – US$1.41bn

At least another 17 of Latin America's precious metals miners recorded impairments in Q4, including seven with write-downs exceeding US$100mn.

Coeur Mining reported impairments of US$276mn at Palmarejo and San Bartolomé in Mexico and Bolivia, respectively, while Hochschild Mining and Tahoe Resources announced write-downs of US$171mn and US$153mn respectively, both relating to Peruvian assets.

In Mexico, Argonaut Gold, Endeavour Silver and First Majestic Silver announced impairments of US$167mn, US$134mn and US$108mn, while Pan American Silver's US$121mn write-downs were at its Dolores and Alamo Dorado mines in Mexico and Moracocha in Peru.

Other companies which reported smaller Q4 impairments in the region included B2Gold, Minera Frisco, Silver Standard, Fortuna Silver, McEwen Mining, Primero Mining, Mandalay Resources, Buenaventura, New Gold and Great Panther Silver.

Excluded from the list was a Q3 US$226mn impairment announced by Mexico-focused Timmins Gold.

OUTLOOK

Whether or not 2016 will see significant write-downs in the Latin American gold and silver mining sector will depend on how prices play out.

Given strong rises so far this year, further major impairments are unlikely, with some companies' price forecasts now looking overly cautious.

Pictured: Goldcorp's Los Filos mine.

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