Last week, the Australian dollar plummeted to $0.64 following the Reserve Bank’s decision to maintain its current interest rates. At the same time, the U.S. dollar increased in value, pressuring gold prices in the U.S., though offering near-record performance levels for gold in Australia. A weak Australian dollar against the U.S. dollar means excellent pricing for local gold producers in Australia, with the asset nearing record levels.
At A$3,014 per ounce, local gold is approaching a record price point on the tail-end of the Australian dollar’s plummet, thanks to the U.S. dollar’s recent strength. With these earnings, Australia’s second-largest gold-producing mine, Northern Star Resources, recently achieved its strongest performance rates, in terms of earnings, on record. The company generated an average realized price of A$2,639 per ounce in fiscal year 2023.
“Northern Star generated a record $1,223 million in Cash Earnings in the past financial year, the result of our focus on safely delivering operational excellence in parallel to adhering to a disciplined approach to investing shareholders’ funds. The full-year result is a credit to our dedicated team, who have worked hard to offset what remains a challenging operating cost environment, particularly in Western Australia,” the company announced in its FY23 financial results.
Northern Star earned a revenue of A$4,131 million, including earnings before interest, taxes, depreciation, and amortization (EBITDA) of A$1,537 million and statutory NPAT of A$585 million. “Combined with the on-market share buy-back that was launched during the year, we have increased our capital management returns to shareholders since Northern Star’s creation in FY12 to $1.4 billion – confirming our position as a leading ASX-listed mining company committed to sustainable returns to shareholders,” the statement concluded.
Northern Star is not the only Australian mining corporation taking full advantage of gold’s near-record highs, though. Both Evolution Mining and Ramelius Resources achieved realized gold prices of around A$2,590 per ounce for fiscal year 2023.
Evolution Mining, a leading global mining force with five operations, earned A$2.23 million in revenue during 2023’s fiscal year, including A$844,513 in EBITDA. The company’s net profits came to A$163.5 million after achieving a total gold production of 651,155 ounces.
Ramelius Resources Limited, a successful gold mining company in Western Australia, generated A$42.6 million in operating cash flow during the June quarter alone. The company’s revenue increased by 5% from last fiscal year, coming to A$631.3 million. Ramelius Resources produced 240,996 ounces of gold during 2023’s fiscal year, allowing it to generate net cash and bullion of A$272.1 million, representing a 57% increase from last year.
“Despite a backdrop of continued cost pressure within the industry, FY23 was a successful year for Ramelius with improvements seen across almost every financial metric when compared to the prior year. A strong A$ gold price during the year and a substantial contribution from the high-grade Penny underground mine in the June Quarter helped to mitigate these cost challenges,” the company’s financial statement explained.
Based on these figures from multiple major mining corporations, it’s clear that FY2023 was a successful year for gold miners in Australia. If the current trends remain, such companies may experience additional price boosts moving into 2024’s fiscal year.
We may see this trend begin to occur on the U.S. front as the Federal Reserve reaches the end of its rate-hiking cycle. The reversal of high rates could allow the U.S.-dollar-backed precious metal to gain support domestically and globally. Analysts currently believe the first rate cut may come by early to mid-2024.
Goehring & Rozencwajg Resources, an investment firm in the natural resources industry, believes that gold could enjoy “explosive” price gains once interest rates begin dropping. According to CME’s FedWatch Tool, the first bets of a rate cut are in January at just under 7%. By May 2024, the odds increase significantly to over 44%.
How rate cuts will affect local pricing in Australia isn’t entirely clear, though we do know that lower rates will likely boost investor demand, allowing gold to gain support. Gold typically has an inverse relationship with interest rates, meaning high rates push prices lower. Australia’s recent rate pause allowed local prices to reach near-highs; now we’re waiting for the same thing to occur in the U.S. as we price gold by the dollar.
The release date for the next U.S. rate decision is September 19 and 20. Until then, traders can assess incoming economic data to predict how the central bank may respond. As always, investors should consult their financial advisors before making any portfolio decisions.