FOLLOWING last month's drop in precious metals prices, gold mining companies should "think the unthinkable" about the price they can expect to get for their output, investment bank Credit Suisse has said.

Investors should also reappraise their expectations about gold and silver prices, a research note published by the bank this week says.

"For both investors and producers," the note says, "it is time to think the unthinkable. In practice that means modeling the effects that a sustained period of $1300 gold and $17.00 silver would have on portfolios, operating margins and cash flows."

April's sharp gold price fall has hit a number of gold mining projects, with world's biggest producer Barrick Gold cancelling at least half a billion Dollars of spending on major projects this year.

The biggest US producer Newmont meantime reported first quarter earnings this week of 71 cents per share, compared to the average estimate among analysts of 76 cents a share. Over the first quarter of this year, Newmont's reported 'average consolidated costs' were equivalent to $758 per ounce produced, a 22% increase on the same period last year. Between 2010 and last year, operating costs went up 40%, the company revealed.

Last month, metals consultant Thomson Reuters GFMS estimated that by its proprietary all-in costs measure, which includes operating costs and other costs such as administration, the average cost-per-ounce across the gold mining industry was $1211 an ounce in 2012.

However, "we think it important to remember that one thing that distinguishes gold from commodities is that it can trade below theoretical levels of marginal cost support for a very considerable time, and has done so in the past," says Credit Suisse.

Gold miners have focused too much on increasing production rather than profits in recent years, fund manager Evy Hambro, who manages BalckRock's commodities funds, said this week.

"Gold miners will become a barbarous relic without change," Hambro told an audience in London, echoing a phrase used by John Maynard Keynes to describe the gold standard, though he noted that some firms have listened to shareholders and promised to increase dividends.