Gold versus gold mining companies
Gold prices (GLD) have risen 13.0% year-to-date (or YTD) through October 13, 2017, compared to a 14.0% gain in the VanEck Vectors Gold Miners ETF (GDX). Although gold miners typically act as a leveraged play on gold prices, this has not been the case in 2017 year-to-date.
Gold miner stocks usually act on company-specific factors rather than taking their cues from broader precious metal prices. Even among miners, these stock price movements have been quite diverse.
Among the senior and intermediate gold miners, IamGold (IAG) has shown the most growth at 59.7% through October 13, 2017. Its exploration growth has been robust, with significant discoveries leading to outperformance.
Kinross Gold (KGC) is the second-ranked performer with a YTD gain of 42.4%. The company has shown strong operational performance along with strong project execution.
Tahoe Resources (TAHO), on the other hand, has shown the highest decline of 44.5%. This decline is due to the suspension of its Escobal mining license by the Guatemalan government. While the license was subsequently reinstated, some conditions attached to it have rendered it virtually useless.
While the above-mentioned companies have diverged significantly in their YTD performance, one of the important ways to gauge their performance for the rest of the year and beyond is through their upcoming earnings.
The North American gold miners’ results season is slated to begin on October 25, 2017, with several miners such as Barrick Gold and Goldcorp (GG) reporting after the market closes. These companies expect to provide updates on their production growth, projects, and cost guidance.
In this series, we’ll assess these upcoming results by looking at analysts’ expectations regarding their revenues, earnings, and free cash flows. We’ll wrap up the series by looking at their relative valuations and the catalysts that could drive their valuations going forward.