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Which Gold Miners Could See Improved Production in 2016?



Goldcorp’s production guidance

In 3Q16, Goldcorp’s (GG) gold production fell 22% quarter-over-quarter to 715,000 ounces. The company has maintained its production guidance of 2.8 million–3.1 million ounces for 2016. Most of the decline was planned due to lower grades at some of the sites.

Goldcorp’s run rate for the first nine months of 2016 was 71% of the midpoint of its annual guidance of 2.8 million–3.1 million ounces. Weaker performances from Penasquito and Cerro Negro could lead the company to underperform on its guidance.

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Increased guidance

In 3Q16, Barrick Gold’s (ABX) gold production was ~1.4 million ounces, a fall of 17.0% year-over-year (or YoY). The fall was mainly due to asset sales in 2015 and 1Q16. It increased its 2016 gold production guidance from 5.0 million–5.5 million ounces to ~5.3 million to ~5.6 million ounces.

Newmont Mining’s (NEM) gold production was 1.25 million ounces of gold in 3Q16, compared to 1.21 million ounces in 3Q15 and 1.3 million ounces in 2Q16. The company increased the lower end of its production guidance from 4.7 million ounces to 4.8 million ounces. The new guidance range is now 4.8 million–5.0 million ounces of gold production for 2016.

The company expects higher production at CC&V, Tanami, Merian, and Long Canyon to offset the declines at Yanacocha’s maturing operations and the sale of Batu Hijau.

Is an upside ahead?

Yamana Gold (AUY) produced 328,604 ounces of gold in 3Q16. That’s 3% higher year-over-year but still lower than market expectations, mainly due to weaker production at the El Peñón mine in Chile. Yamana’s silver production took a YoY hit, falling 24% to 1.6 million ounces, mainly as a result of mine sequencing.

The company maintained its consolidated production guidance at 1.26 million–1.34 million ounces. During its earnings call, Yamana Gold’s executive vice president and chief operating officer, Daniel Racine, stated, “Given [the] year-to-date result, we are well positioned to meet or exceed our consolidated full-year goal in silver production guidance. Yamana has a track record of strong fourth quarter production, which we expect to continue this year.”

Kinross Gold (KGC) produced 684,129 GEOs (gold equivalent ounces) in 3Q16, which represents a 1.0% year-over-year rise and a sequential rise of 2.0%. Increased production was due to the acquisition of Bald Mountain and Round Mountain during the period. The company noted that it’s on track to reach the lower end of its production guidance of 2.7 million–2.9 million ounces.

Most of the miners (SGDM) (GDXJ) maintained their production guidance for 2016. Newmont Mining and Barrick Gold slightly increased their guidance due to strong year-to-date performance.

Although looking at near-term production growth is important, it’s even more important to look at producers’ medium- to long-term production growth. This impacts companies’ mergers and acquisitions, exploration spending, and capital expenditure decisions.

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


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