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Mining Shares Trend Higher With Gold; S.African Producers Outperform

(Kitco News) - The majority of mining companies that trade in North America saw their share prices rise during the first four days of the week as gold also remained strong, with some of the producers that issued earnings reports seeming to get an extra boost.

In many instances, producers listed losses for the fourth quarter that were largely the result of impairment charges and lower gold and silver prices than a year ago. Nevertheless, companies are also showing progress in cutting their costs. South African companies continued to get an added benefit from a weak local currency.

As of Thursday’s close, Comex April gold futures were at $1,238.80 an ounce, a gain of $8, or 0.6%, for the week so far. Comex March silver was down 20.3 cents, or 1.3%, over the first four days of the week to $15.17.

During that same time span, the NYSE Arca Gold Bugs index (HUI) was up 9.0572 points, or 5.7%, to 167.7742. The Market Vectors Gold Miners exchange-traded fund (GDX), which consists of stocks of gold-mining companies, climbed $1.01, or 5.5%, to $19.39 per share.

South African gold miners were once again among the biggest winners, as they were helped by another down leg in the South African rand. This means a higher rand-denominated gold price for these producers, thereby helping their bottom lines.

Harmony Gold Mining Co. Ltd. (NYSE: HMY), which announced it was entering into foreign-exchange hedging contracts, ticked 53 cents higher, or 20%. Anglogold Ashanti (NYSE: AU), which posted a fourth-quarter profit of 16 cents a share, topping expectations, rose $1.75, or 16%. Sibanye Gold Ltd. (NYSE: SBGL) added $1.89, or 16%, after announcing a 2015 profit and rewarding investors with a dividend that topped analyst expectations.

Meanwhile, Golden Star Resources Ltd. (NYSE MKT: GSS) added 8.6 cents, or 29%. BMO Capital Markets reported that the company’s adjusted earnings per share of 3 cents were ahead of estimates. The company said its consolidated cash operating cost of $715 per ounce was the best in five years, while all-in sustaining costs of $896 in the fourth quarter was well below the $1,158 level for the full year.
“The costs delivered in Q4/15 represent the best performance since Q2/10, and serve as a strong endorsement of the company’s unfolding non-refractory strategy and an indication of potential once the underground projects are completed,” BMO said.

Golden Star

Primero Mining Corp. (NYSE: PPP) rose 21 cents, or 15%.

Stillwater Mining Co. (NYSE: SWC) added 96 cents, or 13%, in a week when the company reported that it remained profitable during the fourth quarter despite lower prices of platinum group metals than a year earlier. The Montana-based producer listed net income of 4 cents per share, although this was down from 12 cents in the same period a year earlier. Stillwater trimmed AISC by 15.4% from the same quarter a year ago.

Two major silver producers, which reported earnings prior to the close of the stock market on Thursday, both gained in a week when silver eased slightly. Hecla Mining Co. (NYSE: HL) added 17 cents, or 7%. The company reported a net loss for the fourth quarter but a jump in year-on-year production and an increase in silver reserves. CIBC World Markets said Hecla’s results were in line with expectations. “More importantly, Hecla released 2016 guidance of 13.5 million-14 million ounces of silver and 207,000 ounces of gold (39 million-40 million ounces of silver-equivalent), representing ~5% growth Y/Y,” CIBC said.

First Majestic Silver Corp. (NYSE: AG) climbed 25 cents, or 6%. The company listed a net loss in the fourth quarter, but reported output higher than a year ago and lower all-in sustaining costs.

Meanwhile, MAG Silver Corp. (NYSE: MVG) lost 91 cents, or 11%. The only news out of the company this week was an announcement that it entered into an agreement with a syndicate of underwriters led by Scotia Capital Inc., BMO Capital Markets and Raymond James Ltd, in which underwriters have agreed to purchase, on a bought deal basis, 8.9 million shares at $7.30 each for proceeds of $65 million. “The company intends to use the net proceeds of the offering to fund exploration and development expenditures at the Juanicipio project and for working capital and general corporate purposes,” MAG Silver said. 

Pretium Resources (TSX: PVG) fell 84 cents, or 12%. This company announced an agreement with underwriters for a previously announced market offering of shares, with CIBC Capital Markets, RBC Capital Markets and Scotiabank to be lead underwriters. Underwriters have agreed to purchase 26.2 million shares at $4.58 each for proceeds of $120 million. “The net proceeds of the offering will be used to fund development of the Brucejack project (in British Columbia), for working capital during start-up and for general corporate purposes,” Pretium reported.

Richmont Mines (TSX: RIC) fell 49 cents, or 7%, even though it got some favorable analyst comment – BMO initiated coverage with an “outperform” rating. Early in the week, Richmont reported a fourth-quarter loss of 5 cents per share. Fourth-quarter gold production of 22,380 ounces was comparable to the same period a year ago, with the average realized gold price listed at $1,104 but AISC above $1,200 an ounce.

Rio Tinto (NYSE: RIO), which produces iron ore, coal and base metals, shed $1.71, or 6%. Rio Tinto’s credit rating was lowered by Moody’s Investor’s Service, although the company escaped being brought down to “junk” status.

.By Allen Sykora of Kitco News; asykora@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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