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Citi: Gold Producers Keep ‘Feet On The Ground’ Despite Price Rise

(Kitco News) - Gold prices are up sharply so far in 2016, yet the major North American producers “still have their feet on the ground,” remaining cautious with spending, said Citi Research.

The bank’s analysts issued a report late Wednesday in conjunction with the Denver Gold Forum. They listed their takeaways after management updates were released to forum participants by Newmont Mining Corp. (NYSE: NEM), Barrick Gold Corp. (NYSE, TSX: ABX), Goldcorp (NYSE: GG; TSX: G), Agnico Eagle Mines Ltd. (NYSE, TSX: AEM) and Kinross Gold Corp. (NYSE: KGC, TSX: K).

Comex December gold has rallied 26% so far in 2016 to $1,344.10 an ounce, as of 11:26 a.m. EDT.

Still, “miners remain cautious” and are planning “based on lower prices,” Citi said. “Balance-sheet strength, cost cutting and prudent capital allocation were a constant theme.”

For the industry as a whole, growth remains elusive with most of the major companies facing declining production. One of the exceptions is Agnico Eagle, which is targeting 2 million ounces in the medium term, Citi said.

“Capex is headed to less capital-intensive, less risky brownfield projects, but this is stabilizing production rather than growing it,” Citi said.
Most gold companies appear “broadly comfortable” with current debt levels, except for Barrick, but still generally prefer to build cash balances, Citi said.

“Newmont is an exception, where higher dividends look increasingly likely,” Citi said, adding that expectations are for this to be discussed at a future board meeting.

As for company production guidance, “no news is good news,” Citi said. Analysts said there have been no material changes to guidance or strategy, “generally a positive, in our view, with companies able to hit production and cost reduction goals.”

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

 

 

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