Marginal projects under a cloud

Australia's biggest listed gold producer, Newcrest Mining, could be among the companies facing difficult decisions about the future of individual mines if the recent slump in the gold price continues.

While smaller companies such as Ramelius Resources, Reed Resources and Norton Gold Fields are often named as running the most marginal gold operations in Australasia, larger, more fancied companies such as Newcrest, Evolution Mining, Oceanagold and Alacer Gold also have mines among their portfolios that are unlikely to be profitable at current prices.

Newcrest has been clear in recent months that its Hidden Valley mine in Papua New Guinea has produced gold at "unacceptable" and "very disappointing" prices. Production costs at the mine were $1584 in the December quarter and $1355 in the September quarter. The mine returned a small loss over the six months to December 31.

This year Newcrest said it would "carefully review the performance" of Hidden Valley after a new crusher was installed in April.

Newcrest spokeswoman Kerrina Watson said on Tuesday "significant effort" was being applied to reduce costs at Hidden Valley.

Ms Watson said Newcrest was well positioned to withstand fluctuations in the gold price, despite the challenges at Hidden Valley. "Hidden Valley is the smallest contributor to Newcrest's production and the highest cost by some way ... major investments have been completed at our Cadia and Lihir operations, and these expansions are now ramping up and contributing to production."

Despite briefly trading at its lowest share price since June 2006, Newcrest rallied late on Tuesday to close 92¢ lower at $17.

The goldminers' pain was quickly passed on to mining services contractors such as Boart Longyear, whose ASX-listed shares fell more than 12 per cent to 96.5¢ on Tuesday.

JP Morgan analyst Joseph Kim named Evolution's Edna May West Australian mine, Alacer's assets near Kalgoorlie and Oceanagold's Reefton mine in New Zealand as among the higher-cost mines run by large and mid-tier miners.

Some analysts have warned that 30 per cent of the world's big goldminers would fail to make money with a gold price at $US1300 per ounce. Citi downgraded its gold price forecasts by 10 per cent over the coming two years and now predicts an average gold price of $US1555 per ounce this year, falling to $US1435 per ounce next year.

Citi downgraded Newcrest to a sell rating, but named Oceanagold, Perseus Mining and Beadell Resources as its preferred gold stocks.