Gold Miners That Could Surprise to the Upside on Production in 2017



Improving production

Goldcorp’s (GG) gold (GLD) (NUGT) production improved 3.5% YoY (year-over-year) to 635,000 ounces in 2Q17. The higher production was mainly due to the higher grades at its Penasquito mine following mine sequencing. Its production year-to-date is running slightly higher than its fiscal 2017 guidance of 2.5 million ounces (±5%). 

The company maintained its 2017 guidance in its 2Q17 results. Goldcorp is planning for 20% production and reserve growth in the next five years. During its 2Q17 earnings, it reset its reserve growth target from 50 million ounces to 60 million ounces in the next five years.

Article continues below advertisement

Is there a downside to guidance?

Barrick Gold’s (ABX) gold production totaled ~1.4 million ounces in 2Q17, 7.0% growth YoY, which was higher than the market’s expectations. After slashing its production guidance in 1Q17, the company maintained its guidance for 5.3 million–5.6 million ounces. 

There could, however, be a downside to this guidance. Investors should note that the issues at its subsidiary Acacia’s Tanzanian mines are ongoing. Barrick Gold stated that if Acacia revises its full-year outlook, it would consider the impact on its guidance at that time.

Upgrade to production guidance

Newmont Mining’s (NEM) gold production totaled nearly 1.4 million ounces in 2Q17, which represents 13.0% growth YoY. The additional production from its Long Canyon and Merian mines contributed to this increase. This increase offset the declines at its Tanami and Yanacocha mines. The company also upgraded its production guidance from 4.9 million–5.4 million ounces to 5.0 million–5.4 million ounces.

While NEM maintained its production guidance of 4.9 million–5.4 million ounces for 2017, it increased its long-term guidance from 4.5 million–5.0 million ounces to 4.7 million–5.2 million ounces. The improvement in guidance is on the back of expectations of full potential improvements in North America and Africa.

Kinross Gold (KGC) produced 698,874 GEOs (gold equivalent ounces) in 2Q17, a rise of 3.5% YoY. The production in its American region increased 5.6% YoY. In particular, its Bald Mountain and Round Mountain mines registered strong production growth during the quarter. The company maintained its 2017 production guidance of 2.5 million–2.7 million ounces.

While looking at near-term production growth is important, it’s more important to look at producers’ medium- to long-term production growth. This factor affects companies’ exploration spending, mergers and acquisition decisions, and capital expenditure decisions.

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


More From Market Realist