It's the new gold rush, back to the cheap old days

Just when the gold sector was getting used to life under "the new normal", the big gold price slide of 2013 stepped up a gear.

Just when the gold sector was getting used to life under "the new normal", the big gold price slide of 2013 stepped up a gear.

Fuelled by the apparent end of money printing in the US, the past seven trading days have seen the benchmark gold price fall from about $US1375 an ounce to edge below $US1200 an ounce for the first time since 2010.

With some pundits suggesting a gold price of about $US1000 by 2015, "the new normal" suddenly looks a lot like "the good old days".

The initial gold price slump in April had pushed several of Australia's highest cost goldmines into the red.

Companies including Alacer Gold, Barrick and Newcrest announced plans to sell or park their higher-cost operations and focus on the more profitable mines.

Hundreds of jobs were lost.

But Bill Beament from mining company Northern Star Resources reckoned this week's falls would push the sector even harder towards structural change.

"If the gold price hangs around where it is there are going to be a lot more goldmines shutting in the next three to six months and I think you will see pay cuts coming in for the workers that stay," he said.

"The majors have already said internally they've got a pay freeze on, but a lot of my peers, I think, will be looking the other way. We've got to get our cost base back to where it was in 2010 because that's what we are dealing with, a gold price from 2010."

No sooner had Mr Beament spoken than changes started to filter through. Troy Resources took the knife to executive pay, with directors losing 10 per cent and chief executive Paul Benson taking a 25 per cent pay cut.

Oceanagold announced plans to fast-track the demise of its high-cost Reefton mine in New Zealand, which will now go into "care and maintenance" stage as soon as 2015.

Kingsgate Consolidated also announced plans to run its Challenger mine in South Australia at just 70 per cent of the previously planned rate in a bid to avoid mining high-cost ounces.

The analyst team at RBC Capital Markets suggested those announcements were just the start.

"We expect the prevailing gold price uncertainty to persist short-term and expect to see more announcements in line with this theme over the coming weeks," they wrote in a research note published this week.

The pain will not stop with production downgrades.

RBC expected a swath of impairments to be announced over coming months, with Silver Lake, St Barbara, Kingsgate and Alacer Gold named as the most likely to join Newcrest in announcing asset write-downs.

Newcrest famously revealed this month it expected to write down as much as $US6 billion of the book value of its assets, with much of that linked to the troublesome Lihir mine in Papua New Guinea.

Declines in the Australian dollar have cushioned the blow for many local goldminers, but not enough to prevent the wave of downgrades and restructures.

So where will the price go from here? HSBC reckons it won't go lower than $US1125 an ounce for the rest of the year, and will average a healthy $US1435 an ounce in 2014.

ANZ also expects things to improve, tipping a price of $US1460 an ounce by June 2014.

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