If revenue from sales of gold, silver or sulphuric acid falls below their respective cost of
production for an extended period, we may experience losses and curtail or suspend some or all of our exploration projects and existing operations or sell underperforming assets. Declining commodities prices, including gold, copper and silver, may
also force a reassessment of the feasibility of a particular project or projects, which could cause substantial delays or interrupt operations until the reassessment can be completed.
Foreign exchange fluctuations could have a material adverse effect on our results of operations and financial condition.
Gold is principally a U.S. dollar-priced commodity and most of our revenues are realized in, or linked to, U.S. dollars, whilst cost of sales
are largely incurred in the local currency where the relevant operation is located. Given our global operations and local foreign exchange regulations, some of our funds are held in local currencies, such as the Brazilian real, Argentinian peso,
Australian dollar, Ghanaian cedi and the South African rand. The weakness of the U.S. dollar against local currencies results in higher cost of sales and other costs in U.S. dollar terms. Conversely, the strengthening of the U.S. dollar lowers local
cost of sales and other costs in U.S. dollar terms.
Exchange rate movements may have a material impact on our operating results. For
example, based on average exchange rates received in 2020, we estimate that a 1% strengthening of all of the Brazilian real, Argentinian peso, Australian dollar, Ghanaian cedi and the South African rand against the U.S. dollar, other factors
remaining equal, would have resulted in an increase in cost of sales and total cash costs per ounce of approximately $12 million and $4 per ounce, respectively. As a result of the sale of our remaining South African operations, our exposure to
fluctuations in the strength of the South African rand has been reduced.
The profitability of mining companies operations and the cash flows
generated by these operations are significantly affected by fluctuations in input production prices, many of which are linked to the prices of oil and steel.
Fuel, energy and consumables, including diesel, heavy fuel oil, chemical reagents, explosives, tires, steel and mining equipment used or
consumed in mining operations form a significant part of the operating costs and capital expenditure of any mining company.
We have no
influence over the cost of these consumables, many of which are linked to some degree to the price of oil and steel. Whilst, from time to time, we may implement financial derivatives intended to reduce exposure to changes in the oil price, such
input cost protection strategies may not always be successful, and any of our diesel consumption not covered by these derivatives will continue to be subject to market fluctuations.
The price of oil has fluctuated between $5.6 and $71.44 per barrel of Brent Crude in 2020. In recent weeks, the oil price has increased
precipitously and, as of October 14, 2021, it was at $83.84 per barrel of Brent Crude.
We estimate that for each U.S. dollar per
barrel rise or fall in the oil price, other factors remaining equal, cost of sales and total cash costs per ounce of all our operations change by approximately $2 million and $0.60 per ounce, respectively. The cost of sales and total cash costs
per ounce of certain of our mines, particularly Siguiri, Geita, Tropicana and Iduapriem are most sensitive to changes in the price of oil. Even when fuel prices are in decline, expected savings may be partly offset by increases in governments
fixed fuel levies or the introduction of new levies.
Furthermore, the price of steel has also been volatile. Steel is used in the
manufacture of most forms of fixed and mobile mining equipment, which is a relatively large contributor to the operating costs and capital expenditure of a mine. On October 14, 2021, the price of flat hot rolled coil (North American Domestic
FOB) was $1,895.00 per tonne.
Fluctuations in oil and steel prices have a significant impact on operating costs and capital expenditure
estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining projects or render certain projects non-viable, which could
have a material adverse impact on our results of operations and financial condition.
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