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Which Gold Miners Look Attractive after 1Q17 Earnings?

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Part 3
Which Gold Miners Look Attractive after 1Q17 Earnings? PART 3 OF 14

Are Gold Miners on Track to Achieve 2017 Production Guidance?

Fall in production

Goldcorp’s (GG) gold production fell 16.4% YoY (year-over-year) in 1Q17 to 655,000 ounces. Lower production was mainly due to lower production at Red Lake and a focus on higher grades and lower strip ratio material for Los Filos.

The company expects to see production growth of 20.0% to 3.0 million ounces in the next five years. For a detailed discussion of Goldcorp’s future production and cost reduction drivers, read Will 2017 Mark a Turnaround in Goldcorp’s Fortunes?

Are Gold Miners on Track to Achieve 2017 Production Guidance?

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Slashing guidance

In 1Q17, Barrick Gold’s (ABX) gold production totaled ~1.3 million ounces, representing a rise of 2.3% YoY. That was lower than what the market was expecting. Weaker production growth was due to the timing of autoclave maintenance at the Pueblo Viejo mine and extreme weather conditions at the Lagunas Norte mine.

Barrick slashed its gold production guidance for 2017 from 5.6 million–5.9 million ounces to 5.3 million–5.6 million ounces. About two-thirds of that reduction is due to the company’s anticipated sale of a 50.0% stake in the Veladero mine.

Growth in production

Newmont Mining’s (NEM) gold production totaled ~1.2 million ounces in 1Q17, which represents a 9.0% growth YoY. New production from its Merian and Long Canyon mines, which moved into commercial production in 2016, offset the geotechnical issues at its Carlin mine.

While NEM maintained its production guidance of 4.9 million–5.4 million ounces for 2017, it increased its longer-term guidance from 4.5 million–5.0 million ounces to 4.7 million–5.2 million ounces. It approved several projects that will likely offset the decline from its maturing assets.

Kinross Gold (KGC) produced 671,956 GEOs (gold equivalent ounces) in 1Q17, which represents a 2.3% YoY fall and a sequential fall of 10.0%. The YoY fall is mainly due to lower production at the Kupol gold mine in Russia and the curtailment of production at the Maricunga gold mine in Chile. Kinross Gold maintained its guided production of 2.5 million–2.7 million ounces for 2017, which is consistent with its average production over the past five years.

While miners (SGDM) (GDXJ) are trying to increase production, the sole focus on quantity has somehow shifted to quality ounces in safe jurisdictions. While looking at near-term production growth is important, it’s even more important to look at producers’ medium- to long-term production growth. That impacts companies’ mergers and acquisitions, exploration spending, and capital expenditure decisions.

In the next part of this series, we’ll look at these variables for senior gold miners.

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