The Zacks Analyst Blog Highlights:Barrick Gold, Agnico Eagle Mines, Kinross Gold, Newmont Mining and Richmont Mines
CHICAGO, Nov. 18, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Barrick Gold Corp. (NYSE:ABX-Free Report), Agnico Eagle Mines Ltd. (NYSE:AEM-Free Report), Kinross Gold Corporation (NYSE:KGC-Free Report), Newmont Mining Corporation (NYSE:NEM-Free Report) and Richmont Mines Inc. (AMEX:RIC-Free Report).
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Here are highlights from Monday's Analyst Blog:
Light at the End of the Tunnel for Gold Miners?
Where are gold prices heading? Will gold regain its shine in the market? What is the future of the gold miners battered by falling gold prices? These are the questions that have been hounding the market lately.
Following a horrid Halloween, November started on a sour note for gold with prices below the psychological level of $1,200. This was triggered by the Federal Reserve's announcement that it would end its QE3 bond buying program, surge in equities, further fall in crude oil price and new stimulus measures by the Bank of Japan.
During the first week of November, the gold market took another hammering, falling to four-and-half year lows to $1,143 per ounce on the back of a strong US dollar and a steady climb in the equity market that kept investors away from the safe haven gold market. Gold had lost more than 5% of its value and was almost on the verge of replicating the first back-to-back annual drop since 1998.
It is a well-known fact that gold had suffered a 28% loss in value last year, its worst performance in over three decades. However, on Friday, Nov 7, gold bounced back from the seven day losing streak to $1,170 when the Labor Department stated that the U.S. had generated weaker-than-expected new jobs in October (214,000).
The Week That Was
Last week gold prices closed at $1,160 per ounce on Monday, Nov 10. After moving sideways through the week, prices bounced back, gaining almost $26 to end the week at $1,186. This is the highest level gold has traded at since the metal broke below $1,200 late last month.
The surge was supported by a slightly weaker dollar and based on the speculation that OPEC will cut oil output in a bid to prop up oil prices when it meets in Vienna on Nov 27. Gold and oil often move in tandem as crude oil has an influence on inflation, which increased the demand for gold. The U.S. dollar also moved lower against the euro as economic growth data in both Germany and France came in better than many had expected.
Performance of Gold Miners
Earlier in the third quarter, gold prices bore the brunt of a stronger greenback, which put an abrupt end to the upward trend enjoyed by the yellow metal in the first half of the year stoked by geopolitical tensions. Looking back at the third-quarter results of the gold miners, it does not come as a surprise that lower gold prices have translated into weaker earnings results.
Following the surge in gold prices last Friday, share prices of some of the gold miners in our coverage have moved up in tandem. Shares of Barrick Gold Corp. (NYSE:ABX-Free Report), Agnico Eagle Mines Ltd. (NYSE:AEM-Free Report), and others increased in the range of 6% to 7% in a day.
This is a respite from the beating that these stocks have taken following disappointing earnings results and negative earnings surprise this season. Following the results, alongside gold prices at four year lows, some of these miners had witnessed significant downward price movements and also hit their 52-week lows.
Below we highlight few gold miners that have delivered improved results and witnessed price or estimate revisions over the past week.
Kinross Gold Corporation (NYSE:KGC-Free Report)
Based in Toronto, Canada, Kinross Gold, together with its subsidiaries, is engaged in mining and processing gold and silver ores. It is involved in the exploration, acquisition, development and operation of gold bearing properties. The company has operations in Canada, the United States, the Russian Federation, Brazil, Ecuador, Chile, Ghana and Mauritania.
On Nov 5, Kinross Gold posted adjusted earnings of 6 cents per share in the third quarter of 2014, up 20% from adjusted earnings 5 cents per share in the year-ago quarter, aided by an increase in gold sales. Earnings per share surpassed the Zacks Consensus Estimate of 3 cents, a positive earnings surprise of 100%.
Kinross expects production for 2014 to be at the top end of its guidance range of 2.6–2.7 million gold equivalent ounces, narrowed from the previous outlook of 2.5–2.7 million. For 2014, the company lowered its production cost of sales guidance for 2014 to $720–$750 per gold equivalent ounce from $730–$780 and all-in sustaining costs guidance to $950–$990 per gold ounce sold from the previous outlook of $950–$1,050.
Shares of Kinross have gained 22.6% over the past week. The stock surged 7.5% on Friday to close at $2.71. The Zacks Consensus Estimate for the next quarter is pegged at 2 cents, projecting a 140% year over year growth. Kinross carries a Zacks Rank #3 (Hold).
Newmont Mining Corporation (NYSE:NEM-Free Report)
Headquartered in Greenwood Village, Colorado, Newmont Mining Corporation, together with its subsidiaries, acquires, explores for and produces gold, copper and silver deposits. The company's assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, New Zealand, Mexico and Suriname.
Newmont's third-quarter 2014 adjusted earnings were 50 cents per share, an improvement from 44 cents recorded a year ago. The results topped the Zacks Consensus Estimate of 18 cents, an earnings beat of 177.8%. Shares of this Zacks Rank #3 stock have gained 5% over the past week.
Newmont reaffirmed its expectation for attributable gold production for 2014 of 4.7–5 million ounces. The company expects costs applicable to sales (CAS) for gold to be $710 to $750 per ounce, down from the previous expectation of $720 to $760 per ounce. Newmont also estimates a lower all-in sustaining costs (AISC) of $1,020 to $1,080 per ounce. The company anticipates total copper production of 80,000 to 90,000 tons at CAS of $2.80 to $3.10 per pound and AISC of $3.50 to $3.80 per pound.
Richmont Mines Inc. (AMEX:RIC-Free Report)
Headquartered in Rouyn-Noranda, Canada. Richmont Mines is engaged in the mining, exploration, and development of mining properties, primarily gold in Canada. It operates three gold mines, including the Beaufor/W Zone and the Monique mines in Quebec, and the Island Gold Mine in Ontario. The company is also developing the Island Gold Deep project located in Ontario.
On Nov 6, Richmont Mines reported adjusted earnings per share of 10 cents, a turnaround from net loss per share of 3 in the year-ago quarter. The miner has increased its guidance for 2014 gold production, revised for a second time, to a level of 85,000 to 90,000 ounces.
Richmont Mines continues to invest in the development of its 1.1 million ounce high-grade inferred resource at Island Gold, which has the potential to increase its annual gold production. The company recently hired a contractor to accelerate ramp development and to build out the required additional underground infrastructure. The company expects the ramp to reach a vertical depth of approximately 660 meters by year-end and to extract ounces from the lower zone at Island Gold before the end of this year.
Shares of Richmont Mines have gained 15.4% over the past week. Richmont Mines currently carries a Zacks Rank #3.
What's in Store?
Gold may continue to enjoy a bullish run as the market awaits OPEC's decision on cutting production. Gold prices will get support from retail demand for gold, particularly in India and China. India has overtaken China as the world's largest gold consumer spurred by jewelry demand for the Diwali festival and wedding season.
Rising imports of gold in India is a promising sign and overall purchases of the metal will help support prices. Gold has entered a seasonally strong period and demand will be high with the wedding season in India, Thanksgiving and Christmas in the U.S. and the Chinese Lunar New Year all coming up.
All eyes will be on the Swiss gold referendum. Swiss voters will go to the polls on Nov 30 to decide whether the Swiss National Bank should hold at least 20% of its assets in gold, up from 7% currently. The initiative also demands no further gold sales by the Swiss National Bank and all Swiss Gold to be stored in Switzerland.
A vote in favor would mean the bank will have to buy a considerable amount of gold to increase reserves by around 1,500 tons over five years or 300 tons per year, roughly 8% of annual gold demand. This will have an immediate direct impact on gold prices.
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