Gold Miners’ Earnings Preview: What to Expect in 1Q16



Gold miners’ performance

Senior North American gold miners (GDX) have had a strong run since the start of the year. Barrick Gold (ABX) and Kinross Gold (KGC) in particular have gained spectacularly.

While Kinross posted a rise of 141% as of April 19, 2016, Barrick followed closely with a rise of 112%. These two stocks are more leveraged to gold prices than their senior peers, mainly because of high financial leverage for Barrick and operational leverage for Kinross.

For an in-depth discussion of this outperformance, you can read Why Did Barrick and Kinross Outperform the Senior Gold Peers?

Among intermediate miners, Yamana Gold (AUY) has gained handsomely, with a rise of 129% as of April 19. Historically, Yamana has lagged behind its peers. Due to its high financial leverage, it’s a higher beta play on gold, which led to its share price rising more than its peers’.

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Lower beta play

Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Goldcorp (GG) have risen 67%, 54%, and 47%, respectively, in the same period. Due to Agnico’s and Goldcorp’s lower costs and low financial leverages, their leverages to gold prices are lower compared to other miners, causing them to underperform in times of higher gold prices.

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While these companies have outperformed gold prices year-to-date, investors may be wondering what course they could take going forward.

With earnings season around the corner for these miners, let’s talk about their earnings expectations and some of the common themes in the gold industry. We’ll also talk briefly about specific expectations for each of the six gold producers mentioned above.


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