Goldcorp Inc

When the Federal Reserve chair, Janet Yellen, testified to Congress on February 11, she affirmed the Fed’s consideration of negative interest rates. Under a negative interest rate scenario, investors would pay interest to the bank for holding their money.

Fears in the overall financial market about a Brexit, the possible exit of Britain from the European Union, have abated. This helped gold fall.

Kinross Gold (KGC) produced 671,956 GEOs (gold equivalent ounces) in 1Q17, which represents a 2.3% year-over-year decline and a sequential drop of 10.0%.

Goldcorp’s (GG) all-in sustaining costs (or AISC) are falling. In 2013, its AISC was $1,031 per ounce. It expects the AISC to be in the range of $950–$1,000 for 2014.

Goldcorp (GG) reported its 3Q17 results after the market closed on October 25, 2017. It reported EPS (earnings per share) of $0.13, which beat analysts’ expectations by $0.02.

Cheaper oil means lower inflation. This means gold should be affected negatively since it’s usually considered a hedge against inflation.

Goldcorp (GG), Yamana Gold (AUY), and Hecla Mining (HL) have fallen 4.1%, 15.7%, and 1.1% year-to-date, respectively. However, Gold Fields (GFI) has risen 14.6% year-to-date.

Among the senior gold miners (GDX), analysts are the most bullish on Newmont Mining (NEM), giving it 53% “buy” and 42% “hold” ratings.

Precious metals mining shares that have high correlations with gold include Royal Gold, GoldCorp, New Gold, and Newmont Mining.

Historically, Yamana Gold has lagged behind its peers. Due to its high financial leverage, it’s a higher beta play on gold compared to its peers.

For mining companies, 2016 brought a ray of hope. Gold had the best quarterly performance in 30 years and silver climbed to its 11-month high.

Physical buying from China and India should support the demand for gold. But a rate hike by the Fed could be the catalyst that could take gold down.

AISC (all-in sustaining costs) are an encompassing measure that helps compare miners’ performance—a vital metric for investors. They show the company’s margin cushion at prevailing gold prices (GLD)(IAU).

Even though precious metals miners have seen a remarkable rally in their prices, many fund managers have begun unloading their holdings in gold equities.

It’s important to keep an eye on labor conditions since they offer a look at the future direction of gold prices and ultimately gold-backed ETFs.

Gold continues to trade at its five-year low. It’s hovering in the range of $1,100–$1,150 per ounce. Gold futures on COMEX lost 5.90% on a YTD basis.

U.S. public debt is the amount owed by the federal government in terms of outstanding treasury securities. For September 2014, U.S. debt to GDP was 102.9%.

The average ratio of the NYSE Arca Gold Miners Index and the S&P 500 Index (SPY) is 0.18 compared to the ten-year average of 0.68.

In the fourth quarter, Newmont Mining (NEM) produced 1.44 million ounces—a rise of 8% YoY (year-over-year).

In 2015, Goldcorp (GG) achieved record gold production of 3.5 million ounces. This is a solid 24% growth YoY. The company achieved its production guidance of 3.3–3.6 million ounces.

Barrick’s high financial leverage is a key investor concern. Resolving this could lead to rerating of Barrick stock, a positive for Barrick’s share price.

Berenberg noted that recent developments at Barrick, in addition to its deleveraging and strong free cash flow generation, are positives for the stock.

Inflation hedge Investors tend to hold gold in their portfolios as insurance against inflation. When inflation is high, the value of paper currency, in terms of the goods and services it can buy, falls. As investors want something that doesn’t lose its value, gold usually has a direct relationship with inflation. Demand for gold increases as inflation […]

Goldcorp’s asset portfolio is located in politically stable, low-risk jurisdictions in the Americas. This is one of Goldcorp’s key advantages. Many gold miners are facing political instability and taxation issues.

Investors were somewhat pessimistic about gold during the last quarter of 2016. Most of the fluctuations were due to the news of the interest rate hike.

Tracking China and India’s inflation figures can give you insight into gold prices’ future direction. It also provides you a look into gold-backed exchange-traded funds (or ETFs) like the SPDR Gold Shares (GLD).

After outperforming peers by a wide margin, Barrick Gold (ABX) has lagged behind so far in 2017.

Central bank policies can have a significant impact on gold price. Central banks are a large gold holder. They own ~30,500 tons of gold. This is close to 20% of the gold ever mined. As a result, their policies on gold sales, gold purchases, and other monetary policies can have a significant impact on gold price.

OPGSX may also invest up to one-fifth of its portfolio directly into gold or silver bullion and other precious metals.

Goldcorp (GG) has one of the strongest project pipelines in the industry. These projects underpin the company’s 20% growth in reserves by 2021.

Vanguard Precious Metal and Mining Investment Fund (VGPMX) lags in diversification, as it’s a pure sector fund.

On July 28, Yamana Gold (AUY) announced the recommissioning of C1 Santa Luz, a project located in Bahia, Brazil. It was put on care and maintenance in 2014.

Goldcorp continued with its lower cost trend, as the key cost metric AISC (all-in sustaining costs) fell 21% YoY and remained almost flat QoQ in 3Q15.

Wall Street analysts estimate revenue of $2.0 billion in 2Q16 for Barrick Gold (ABX), which is slightly higher than the $1.9 billion ABX earned in 1Q16.

Money supply is the total amount of currency and other liquid instruments in circulation in an economy. Money supply data is usually collected and published by the country’s central bank.

Gold prices gained 1.71% YTD (year-to-date)—despite the US Dollar Index increasing by almost 9% YTD. Prices are in a long-term downtrend.

North American senior gold miners (RING) had a strong run in 2016, with an average gain of 72% in the group as a whole.

Gold is often touted as the safe-haven asset that investors embrace in times of economic and political uncertainty.

Gold April futures contracts are trading in a downward trending channel. Gold prices settled just above the key support on March 9, 2015.

Goldcorp stock has lost 4.7% year-to-date through the end of September, underperforming its close peers.

As a group, the average gains of North American senior gold miners (GDX) (RING) have been muted.

This series analyzes gold prices and market fundamentals. June gold futures trading on the COMEX slightly declined by 0.02% on May 22, 2015.

Gold doesn’t give any returns besides appreciation. Appreciation doesn’t always happen. As a result, gold has to compete against assets that yield something. When the return on the alternate assets begins to rise, the demand for gold falls. In a scenario where the real interest rates are rising continuously, the demand for gold—as an investment—will start falling.

For 1Q17, ABX reported adjusted EPS (earnings per share) of $0.14, which was lower than the consensus estimate of $0.20.

The Cortez mine is one of the largest and lowest-cost mines in the world, with huge upside exploration potential. It is Barrick’s largest-producing mine and contributes close to 15% of the total production.

Wall Street analysts expect Goldcorp’s revenues to fall 2.3% to ~$3.4 billion in 2017.

Although 2017 has not been very good for Newmont Mining stock due to short-term issues, its outlook remains strong.

Senior gold miners are large miners with established positions. While there are variations between different miners, as a group, they usually follow gold prices.

As of July 28, 2016, Kinross Gold was trading at $5.03 per share. About 32% of Wall Street analysts covering the stock have issued “buy” recommendations.

If the uncertainty in the Eurozone increases, gold may rally. On the other hand, a sooner-than-expected rate hike would likely push down non-yielding assets such as gold.

Goldcorp’s (GG) management has unveiled a plan to create value for the company over the next five years.

Citigroup’s (C) Alexander Hacking upgraded Barrick Gold to “neutral” from “sell” on August 28 and lowered its target price from $12 to $11.

Goldcorp’s gold production fell 16% YoY in 4Q16 to 761,000 ounces.

For 3Q16, Newmont Mining (NEM) reported AISC (all-in sustaining costs) of $925 per ounce, which is 5% higher YoY and 6% higher quarter-over-quarter.

Barrick Gold’s 60% share in 3Q14 production at Pueblo Viejo was 168,000 ounces, an increase of 49% from the year-ago level. The increase is because of the full ramp-up of the mine following modifications to the facilities.

Gold prices have gone through a rough patch recently with prices closing near their seven-month lows.

Barrick Gold (ABX) produced ~1.43 million ounces of gold in 2Q17, which represents a growth of 7% on a year-over-year basis.

Debt to gross domestic product (or GDP) is the ratio that shows how much a country owes versus how much it earns. Investors use this ratio to measure a country’s ability to make future payments on its debt. This impacts the country’s borrowing costs and government bond yields.

Agreement on the Greek bailout extension sent gold reeling to under $1,200 per ounce. Highly indebted Greece now has four months to get its ducks in a row.

Gold miners face the problem of compensating for every ounce they take out of the ground.

Barrick Gold has reiterated that strengthening its balance sheet is its top priority. The company achieved debt reduction of $2.0 billion in 2016.

Newmont Mining reported EPS of $0.33, which beat the consensus estimate by $0.14. Its revenue of $1.73 billion, however, missed the mark.

It’s expected that precious metal mining stocks will follow precious metals. So it’s crucial to know which stocks are closely associated with precious metals.

GDX consists of publicly-traded global companies. The companies are primarily involved in gold mining. It has assets worth $7.2 billion.

A record number of junior companies attended the Precious Metals Summit. We are finding companies with attractive development projects in North America and West Africa as well as some exciting discoveries that merit watching.

Gold is related to silver, oil, and copper. Relationships between commodities are examined to establish if one commodity’s price can fuel another commodity’s price. For example, it’s universally acknowledged that gold and silver prices are related. Silver’s price depends on gold’s price.

Kinross reported AISC of $988 per ounce in 2Q16, which is an improvement of 2.3% YoY (year-over-year) but is higher sequentially by 2.6%.

In 2013, China passed India as the largest gold consumer. China’s private sector gold demand reached a record level of 1,132 tons in 2013. China’s middle class has been increasing. This supports gold demand. Recent research from the World Gold Council (or WGC) shows that there are 300 million people in China’s middle class. In just five years, China’s middle class is expected to grow to 500 million.

Goldcorp (GG) has significantly improved its liquidity YoY (year-over-year) from $1.9 billion in 3Q14 to $3.3 billion in 3Q15.

Goldcorp posted 1Q18 earnings per share of $0.08, missing the consensus by $0.03 and much lower than its 1Q17 earnings per share of $0.20.

Barrick and Newmont—two of the largest gold miners—were the first to be punished by investors based on high financial leverage.

Among senior gold miners, analysts are most bullish on Newmont Mining, with 60.0% “buy” and 35.0% “hold” recommendations.

The best bet is to go for gold miners with healthy balance sheets, increasing production profiles, low costs, and good cash flows.

Barrick Gold delivered FCF of $385.0 million in 4Q16 and $1.5 billion in 2016. The 2016 FCF was a annual record for the company.

Goldcorp (GG), a Canada-based gold producer, underperformed the VanEck Vectors Gold Miners Index ETF (GDX) year-to-date.

Goldcorp (GG) has given negative returns in 2017. Its stock has lost 6.1% of its value as compared to a gain of 12.8% in the iShares Gold Trust (GLD) and 11.1% in the VanEck Vectors Gold Miners ETF (GDX).

When we combine the nominal rate of 3% and inflation of 2% for August, we arrive at 1% real rate of interest for savings. This rate is increasing. The increase is a result of inflation.

On October 27, 2016, Newmont Mining (NEM) announced an offer to purchase for cash notes due 2022 worth $500 million.

Barrick’s five core mines, which are expected to produce 70.0% of its volumes for 2017, have an average grade of 1.8 grams per ton.

Yamana Gold released its third-quarter results before the markets opened on October 26. The company held a conference call the same day.

All the gold miners (RING)(GDX) we’re covering in this series except for Barrick Gold (ABX) reported earnings beats in 3Q17.

The gold-silver ratio was trading at 78.7 on Monday, April 11, 2016. The gold-silver ratio is trading close to its 100-day moving average.

Gold prices closed 2016 with a rise of 8.5% for the year, but gold prices had been 27% higher at one point in the year.

Currently, Agnico Eagle Mines (AEM) is trading at a forward EV-to-EBITDA multiple of 11.2x, the highest among the senior miners (GDX).

For 1Q17, Newmont reported AISC (all-in sustaining costs) of $900 per ounce, which is 8.7% higher year-over-year and 2% lower quarter-over-quarter.

Last year, Newmont repaid $1.3 billion in debt, which brought its net debt at the end of 2016 to $1.9 billion and represents a huge reduction of 46% year-over-year.

Of the 18 analysts covering Newmont Mining (NEM), ten have issued “buy” recommendations, while eight have issued “hold” recommendations on the stock.

A few of the macro indicators that affect gold and precious metals prices are the interest rate, inflation rate, trade balance, and the US dollar.

Newmont Mining tries to achieve higher production every quarter. Its gold production was 1.3 million ounces in 2Q16, compared to 1.2 million ounces in 2Q15.

In 1Q17, ABX’s gold production totaled ~1.3 million ounces, representing a rise of 2.3% YoY (year-over-year).

Investors in the gold mining industry need to know a company’s debt levels, as high debt can strain a company’s credit rating.

Investors should watch out for any tailwinds or headwinds that could impact Newmont’s costs in 1Q15.

After the 2008 global financial crisis, the Fed’s balance sheet expanded from ~$850 million to more than $4.4 billion. The Fed buys long-term securities. Long-term securities provide banks with excess reserves for lending.

On March 6, 2015, gold prices hit a three-month low and settled just above the important support level.

Barrick Gold achieved AISC of $732 per ounce in 4Q16—flat YoY, but a sequential rise of 4.0%.

Among senior gold miners, Goldcorp is trading at the highest multiple of 10.3x—a premium of 31% compared to the peer average.

Hedge funds increased their net positions in the SPDR Gold Shares ETF during the first quarter.

Along with analyst ratings, it’s important to look at the recent changes to recommendations and target prices.

In a press release today, Newmont Mining said that Barrick’s unsolicited negative premium proposal is not in shareholders’ best interest.

All-in sustaining costs (or AISC) came in at $554 per ounce, a reduction of $142 per ounce from the same period last year. The reduction was mainly due to lower sustaining capital expenditure (or capex).