Additionally, precious metals producers could find it harder to squeeze out a profit as prices continue to drop. Moody’s points out that operating costs for gold producers rose as miners chased new and more costly production avenues while other key inputs, such as wages, power, consumables, exploration, environmental spending requirements and government royalties, also increased.
The ratings agency calculates that the all-in average cost of gold production is at least $1,100 per ounce from a combined $850 per ounce in operating costs and a minimum $250 per ounce of sustaining capital costs. Nevertheless, miners can cut back on costs, such as focusing on higher-grade ore, idling higher-cost mines, reduce exploration or diminish worker count.
The Market Vectors Gold Miners ETF (NYSEArca: GDX) has declined 51.2% over the past year.
For more information on gold and silver, visit our gold and silver categories.
Max Chen contributed to this article.