Mining companies may be faced with difficult decisions about operations if gold prices retreat suddenly from recent highs, said a Standard & Poor’s analyst Tuesday.
Lower gold prices could lead miners to curb new projects, close down expensive operations or cut dividend payments to investors, said Standard & Poor’s Rating Services credit analyst Elad Jelasko.
The price of gold has risen nearly 11 percent this year, ending Tuesday at $1,734.90 per ounce on the New York Mercantile Exchange. The price of gold has climbed because some investors worry about inflation resulting from moves by the Federal Reserve to stimulate the economy. They consider investing in gold protection against rising prices.
The increase in gold prices has helped protect miners from rising costs for their own materials and higher investments in mines.
But that could reverse course suddenly, as gold prices tend to be volatile, Jelasko said.
If gold prices drop suddenly, large gold miners could “cope” for a year to 18 months, Jelasko said, as they have enough access to credit and low debt levels. But sustained low prices would lead to tough decisions for miners, including delaying mine projects.
Shares of major gold miners edged up Tuesday.
— Barrick Gold Corp. rose 8 cent to close at $39.46. Shares have dropped 13 percent this year.
— Freeport-McMoRan Copper & Gold Inc. added 33 cents to $39.93, and is up 8.5 percent this year.
— Newmont Mining Corp. increased 64 cents to $52, and is down 13 percent in 2012.
— Goldcorp Inc. gained 13 cents to $42.29, and has lost 4.4 percent this year.
