posing a few questions re. abm, page-18

On the subject of potential cash flows.
The numbers I work on are at spot prices but consider the upside from a lower AUD;

At the bottom of the last gold price cycle in 2000, the US miners had to deal with $246 gold - down from $400 in 1995/96. At that time the AUD dropped from 85c in 1990 (or 82c in 1996) to 48c, so our miners were getting around AUD$510/oz at the lows- double what the US producers were getting. Gold dropped 38% from recent highs, AUD dropped 41%.
Near that 2000 bottom I remember my Hill50 gold paying a 10% fully franked div (13% grossed up yield). US producers were probably struggling but not ours.
Late 2008 GFC lows, gold dropped 30% to $700, but again the AUD dropped closer to 40% to 60c. Our miners were getting $1165/oz or 66% better than US peers.
This time gold has led everything else down including the AUD. POG down 32% but AUD only down 15%.
Chances are AUD will drop quite a bit further and I think it could again drop by more than POG as with previous lows.
If instead it only falls as far as gold (32% from peak -assuming gold bottoms here) AUD will drop to 73c and our producers will receive AUD$1760/oz.
Share prices would rocket back up towards previous highs. If AUD falls 40% again on a slowing China story gaining acceptance (to 65c), AUD POG would be at $1976- almost A$2000/oz.
If gold falls even further then so too can the AUD. Recent history shows the AUD usually falls by more than gold. Sentiment would turn very rapidly if history repeats or even comes close re AUD/POG relationship. Remember if China slows, the RBA will likely cut rates quite a bit further. Rates closer to overseas rates and weak commodities equates to a further big drop in AUD. A$1750-2000 gold is easily conceivable even with flat USD gold.

Everyone blames high costs on miners for chasing lower grades. Reality is production is fairly flat over 10 years despite record high prices. I.e. it was chase lower grades or face rapidly declining production despite high POG. There simply is not as much high grade to mine as there used to be (not so for ABU!). Now most overseas majors will cut production and that should support the US POG or propel it much higher when the market sees lower supply not meeting demand. OUR producers should not be struggling for long. The survivors will reap the benefit of lower AUD and later, higher USD gold. It won’t go below cost of production for overseas majors and stay there. While it is there our producers will still be making money. I don’t know where the bottom will be but the upside could be similar to the post GFC rally. This is an excellent long term opportunity in the quality Aussie based producers with good assets and competent management.