Gold versus gold mining companies
Gold prices rose ~3% year-to-date (or YTD) after rising ~13% in 2017. Gold prices are affected by a number of factors, including rate hike expectations, trade war fears, the US dollar, and increasing volatility.
For more on these rallies, see Market Realist’s series Gold Price Drivers: The Fed, Trade War Fears, the US Dollar
Gold mining stocks usually act as a leveraged play on precious metal prices, but for the past year or so, the miners have been behaving differently. While the SPDR Gold Shares (GLD) returned 12.8%, the VanEck Vectors Gold Miners ETF (GDX) returned 11.1% in 2017. Company-specific factors were more dominant for these miners in 2017 and have been that way year-to-date.
Among the senior and intermediate gold miners, Goldcorp’s (GG) stock price showed the most growth, at 12.5%, YTD until April 17. Goldcorp beat 4Q17 earnings expectations. Investors seemed pleased with the company’s performance and future guidance. The company’s 20-20-20 growth plan also seemed to be on track, boosting investors’ confidence in GG’s future growth and profitability.
Newmont Mining (NEM) is trailing GG closely with a YTD gain of 10.9% for pretty similar reasons. Along with reporting an earnings beat in 4Q17, Newmont has guided for a stable to rising production profile.
Barrick Gold (ABX), on the other hand, has seen losses amounting to 9.7% YTD, mainly due to its production growth concerns.
Gold miners’ performances have diverged greatly, based on their operational performances and other company-specific issues. These companies are slated to release their 1Q18 earnings in the next few weeks, and these results will be important when it comes to gauging their performances for the rest of the year and beyond.
The North American gold miners’ results season is slated to begin on April 23, with Barrick Gold (ABX) reporting after the market closes. The results from NEM, GG, Kinross Gold (KGC), and IAMGOLD (IAG) should follow. 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 Wall Street analysts’ expectations for revenues, earnings, and free cash flows. We’ll wrap up the series by looking at these companies’ relative valuations as well as the catalysts that could drive their valuations going forward.
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