Industry Trend Analysis - Gold: Further Declines Before Rebound - APR 2015

BMI View : Peruvian gold output will decline further before seeing positive growth later this decade. Decline ore grades and productivity will dent output in 2015 and 2016, before positive growth resumes in 2017 on the back of new gold projects coming online.

We are downgrading our outlook for Peruvian gold production over the coming five years on the back of both recent output declines and government projections for the sector. We now forecast production will decline 1.0% and 0.5% in 2015 and 2016, respectively, in contrast to our previous forecast for growth of 1.0% and 1.25% over the same period. We forecast production growth to resume in 2017-2019, growing 2.3% on average per annum over the period. Given our downgrade though, we expect Peru's share of global gold mine output will drop from 5.2% in 2014 to 4.8% in 2019. Nevertheless, the country will remain comfortably within the top-ten of global producers over the next five years.

Our production forecast subdued on account of our forecast for weak gold prices, which we forecast will average USD1,100/oz in 2015 and USD1,050/oz in 2016. Lower prices will put pressure on miners' margins and limit capital expenditure on both existing mines and projects in development. Various gold mining firms have already announced various divestments and cuts to capital expenditure, and we expect such moves will continue in the coming quarters.

Not The Golden Years
Peru - Gold Exports, Value & Volume

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