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Miners Up With Gold; Barrick, Goldcorp Helped By Earnings Beats

(Kitco News) - Higher gold and silver prices enabled mining stocks to rally sharply during the first four days of this week, with two of the world’s largest producers – Barrick Gold Corp. and Goldcorp Inc. -- getting an added boost after their first-quarter earnings per share topped consensus forecasts.

As of late Thursday, Comex June gold futures were at $1,268.10 an ounce, a gain of $34.40, or 2.8%, for the week so far. Comex July silver was up 57 cents, or 3.3%, for the first four days of the week at $17.60.

During that same time span, the NYSE Arca Gold Bugs index (HUI) soared 15.5342 points, or 7.7%, to 217.8282. The Market Vectors Gold Miners exchange-traded fund (GDX), which consists of stocks of gold-mining companies, rose $1.69, or 7.5%, to $24.28 per share.

Great Panther Silver Ltd. (NYSE MKT: GPL) was once again one of the biggest gainers of the week, adding 58 cents, or 42%. The company’s share price has doubled this month, no doubt helped by silver’s sudden ascent but also likely benefiting from news earlier this month that silver-equivalent output in the first quarter rose year-on-year. At the time, Rodman & Renshaw pointed out that Great Panther’s output was stable compared to the fourth quarter even though throughput decreased, meaning next week’s earnings report could show that costs fell quarter-on-quarter.  

Harmony Gold Mining Co. Ltd. (NYSE: HMY) climbed 43 cents, or 14%. Harmony reported this week that Van Eck Associate Corp. acquired its shares, leaving the total held by Van Eck at 10.10% of total Harmony shares.

Primero Mining Corp. (NYSE: PPP) gained 21 cents, or 13%. Shares snapped back after the company was one of the few decliners a week ago after lowering guidance for 2016 after first-quarter output fell due to implementation of safety measures at Sam Dimas. Primero chief executive Ernest Mast also said the company was “committed to getting our operations up to full capacity as quickly as possible.”

SEMAFCO Inc. (TSX: SMF) climbed 60 cents, or 13%.

Goldcorp Inc. (NYSE: GG) added $1.86, or 11%. The company posted first-quarter net earnings of $80 million, or 10 cents per share, a turnaround from a net loss of $87 million, or 11 cents per share, in the first quarter of 2015. Goldcorp listed production of 783,700 ounces during the January-March period, up from 724,800 a year ago, at all-in sustaining costs of $836 per ounce, down from $885.

Analysts point out that Goldcorp topped consensus forecasts. The results were “slightly positive,” said BMO.

“We are cautious on GG over the next six months as the market continues to rebase expectations, in particular for Penasquito capex, the Red Lake-Cochenour complex production expectations and Cerro Negro throughput,” Credit Suisse said. “Positively, GG has a strong balance sheet and has outlined a new strategy to focus on NAV/sh growth.”

Barrick (NYSE: ABX) shares climbed $1.43, or 9%. The company reported that first-quarter adjusted earnings adjusted net earnings rose to $127 million, or 11 cents per share, from $62 million, or 5 cents, in the same period of 2015. The company continued its debt-reduction efforts, plus maintained full-year 2016 production outlook while lowering its guidance for costs.

CIBC and BMO pointed out that Barrick slightly topped consensus estimates of 10 cents a share. The Barrick results appear to be consistent with the company’s stated guidance for 2016 of lowering its free-cash-flow breakeven point to $1,000 an ounce, cutting debt by $2 billion and improving productivity, said CIBC, which upped its price target.

“We rate ABX ‘outperform’ due to its capital allocation strategy, which ideally positions it to capture gold-price leverage,” said Credit Suisse. 

Said CIBC: “The new strategy, cost-saving measures and the more conservative but achievable target should be positively received by investors. The solid Q1 performance helped to set a good start for a new course.”

Coeur Mining, Inc.’s (NYSE: CDE) shares rose 55 cents, or 8%. The largest U.S.-based silver producer reported that its first-quarter adjusted net loss narrowed from a year ago as the company cut costs, although total revenue was also lower due to reduced output that was the result of a transition to underground operations at the Palmarejo mine. BMO commented that Coeur performed better than consensus analyst, but adding, “Operating margins continue to improve, but ultimately it’s all about Palmarejo.”

Centerra Gold Inc. (TSX: CG) was one of the few gold companies that was on the defensive, losing 38 cents, or 5%. Shares fell Thursday as the company reported that the Kyrgyz Republic General Prosecutor's Office and other law enforcement agencies conducted a search at the Bishkek offices of the company’s subsidiary, Kumtor Gold Co., reportedly gathering documents for a possible criminal case over alleged financial violations. Centerra says the government has recently indicated dissatisfaction with current arrangements governing Centerra and the Kumtor project, but no negotiations have taken place. Should Centerra be unable to resolve issues with the government, there would be a “material adverse impact on the company's future cash flows, earnings, results of operations and financial condition,” Centerra said.

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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