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What Does Pueblo Viejo’s Production Mean for Gold Companies?


Nov. 26 2015, Updated 8:06 a.m. ET

Impact on Barrick Gold

To show the temporary weakness at the Pueblo Viejo mine, Barrick Gold (ABX) reduced its 2015 production guidance by ~2%—based on the mid-point guidance range. Its new guidance is 6.0–6.2 million ounces compared to its previous guidance of 6.1–6.3 million ounces. However, the company maintained its AISC (all-in sustaining costs) guidance of $830–$870 per ounce.

Previously, Barrick reiterated that 4Q15 will be its strongest quarter in terms of production. Based on Barrick’s production guidance, Pueblo Viejo would have accounted for nearly 12% of its total production at 212,000 ounces in 4Q15. Barrick also stated in a press release, that it has a business interruption coverage that’s triggered after 30 days.

On a positive note, while the repairs are underway, Pueblo Viejo is bringing maintenance activities forward. They were previously scheduled for January 2016. This is being done to optimize the processing downtime.

The issue’s overall impact on Barrick Gold isn’t expected to be material. Most of the analysts see the issue as being short term and immaterial to the overall thesis on Barrick Gold.

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Impact on Goldcorp

Goldcorp (GG) didn’t change its production guidance after the Pueblo Viejo mine issue. However, it stated that it expects the production to be at the mid-point of its guidance range of 3.3–3.6 million ounces. It also maintained its AISC guidance of $850–$900 per ounce. Previously, the company hoped to achieve the higher end of the guidance range. Pueblo Viejo forms ~11% of Goldcorp’s production. On an annual basis, the impact should be relatively minor and immaterial.

Impact on Royal Gold

Royal Gold (RGLD) stated that its initial delivery is due on December 15 for July 1–November 30. It isn’t expected to be impacted materially by the mine issue at Pueblo Viejo. Barrick already confirmed 8,900 ounces relating to the production in July and August 2015.

Combined, Barrick Gold and Goldcorp form 13% of the VanEck Vectors Gold Miners ETF (GDX). Investors can access the gold industry by investing in gold-backed ETFs like the SPDR Gold Trust ETF (GLD).


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