High-cost producers feel the pinch
These are nervous times in the gold sector, and not just at the small end of the market.
Numerous mines in Australia and New Zealand are unprofitable at the sorts of gold prices seen over the past few days, and in a commodity where single-mine companies are common, that means quite a few are facing an uncertain future.
That might be hard to believe, given that Monday's low of $US1425 per ounce would be considered an excellent price for gold over most of the past 20 years.
But goldminers are also facing labour costs near record highs, and a local currency that refuses to fall in line with the commodity price.
"There are definitely a few gold producers out there who wouldn't be making money at these prices," said Mike Millikan, a gold analyst for Hartleys in Perth.
A recent Bell Potter survey of 15 mid-tier Australian producers showed that total production costs averaged $1170 per ounce.
Bell Potter analyst Mark Paterson said five of those 15 would be marginal at the current price.
Those with costs at the higher end include Ramelius Resources, Reed Resources, Norton Gold Fields, Focus Minerals and Saracen Mineral Holdings.
Two junior gold miners have gone into administration in recent weeks - Navigator Resources and Kentor Gold - and PPB Advisory's corporate restructuring specialist Campbell Jaski said he was seeing an increasing number of gold producers seeking help to stay afloat.
Mr Jaski said a failure to manage risk through hedging the gold price was a common feature among the companies in distress.
"Over the last five years we have seen the majority of gold producers (remove) their hedge book, so there has been a reluctance to hedge," he said.
But it's worth remembering that sometimes there are important details to explain what looks like a devil.
Take Saracen for example, a small WA gold miner whose costs have been pushing $1600 per ounce. The company has been spending up on expansion of its Whirling Dervish mine, which will lead to higher production next year.
"Once those key expansion projects are done ... we are at a stage then that capital spend drops right off and our margins increase," said Saracen boss Raleigh Finlayson.
Furthermore, Saracen was one of the few gold juniors to take out a hedge under the terms of a debt package with Macquarie. That hedge will see Saracen sell about 188,000 ounces of gold at an average of $1698 per ounce over the next couple of years.
Sound sensible? Not sensible enough to prevent Saracen losing close to 18 per cent of its market capitalisation on Monday.