Goldcorp (NYSE:GG) soared over 5 percent by the close of trading Thursday, ending the session at $44.29, after a stunning performance in the third quarter.
What was most impressive was its management of costs, even though the reported story will probably be the fact they increased profits y four times the same quarter last year, reaching $4.66.5 million, or 63 cents a share. That's up from $114.2 million, or 16 cents a share, in 2009.
To add a little icing on the cake, they also doubled their dividend to 36 cents a share.
"Our confidence in the Company's financial position and ability to generate strong future cash flows led us to announce a 100% increase in our dividend," CEO Chuck Jeannes said.
Revenue for the quarter also rose nicely, increasing by 28 percent to $885.8 million.
While gold prices are an obvious benefit to every gold miner, it is those who have the discipline and knowledge to control costs who will survive and thrive, as the gold bull market won't last forever, and eventually gold prices alone won't be able to drive performance, which poor ones can be hidden because of the gold price climate we are now experiencing.
To show Goldcorp's ability and determination to control costs, in their first month of operations at their new flagship Penasquito mine, they were able to enjoy a negative cash cost in the first month of production. That's not an easy task to accomplish.
Stifel Nicolaus upgraded Goldcorp from "Hold" to "Buy," saying they see earnings and production growth to continue on.
Goldcorp gained $2.21, or 5.25 percent in Thursday trading. Stifel placed a price target of $53 on them.
Friday, October 29, 2010
Goldcorp (NYSE:GG) soared over 5 percent by the close of trading Thursday, ending the session at $44.29, after a stunning performance in the third quarter.
Thursday, October 28, 2010
A couple of things are working in the favor of gold prices, as they have taken a breather as profits are taken and direction sought concerning the economy and inevitable new round of quantitative easing by the Federal Reserve.
Bank of America sees the Federal Reserve buying $1 trillion in government debt, while Goldman Sachs (NYSE:GS) sees the Fed acquiring $2 trillion in debt.
They are going to do this incrementally most believe in order to keep the shock of how much more they're going into debt hidden from the American people.
The two giant financial institutions see the Fed starting off with $500 billion to begin with, and adding to that throughout the next year. It should all begin sometime right after the Fed meetings on November 2nd and 3rd.
There is no doubt gold prices will soar for the two reasons mentioned above, and when the market understands the quantitative easing fiasco will be implemented in stages, but will still bring possibly trillions more of debt to the nation, it's hard to tell how quickly gold prices will move up as they continue to shatter historical records.
Wednesday, October 27, 2010
Kinross Gold Corporation (NYSE:KGC), Eldorado Gold (NYSE:EGO) and Agnico-Eagle (NYSE:AEM) plunged along with the broader gold market, as mixed economic data and the strength of the U.S. dollar pushed gold prices today down.
Even though expectations the global and US economy is slowing down and a new round of quantitative easing is just around the corner, that didn't keep the dollar down today or the price of gold up, as gold continues to temporarily correct. It should be considered a buying opportunity at this time.
For Kinross, Agnico and Eldorado, they're among the largest gold miner losers today, with their share prices falling more than most.
Agnico is the strongest of these three gold miners mentioned, dropping to $69.85, losing $1.82 or 2.54 percent as of 12:59 PM EDT.
Eldorado has fallen to $16.46 a share, losing $0.71, or 4.14 percent.
Kinross was at $17.02, falling $0.63, or 3.57 percent as of 1:01 PM EDT.
Gold prices today have plunged as the US dollar strengthened on mixed economic news.
The stronger dollar has also pushed the price of other metals and commodities down, pressuring natural resources companies in general.
Uncertainty surrounding the inevitable resumption of quantitative easing may be pushing gold prices temporarily down as well, as the idea it may done more incrementally than in huge amounts could weigh on gold temporarily, even though in the long haul quantitative easing will produce the same inflationary results which will ultimately push up the price of gold.
Major gold miners like Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG) and Newmont Mining (NYSE:NEM) were all down by around 2 percent, with Newmont holding the strongest at just under a 2 percent decline for the day, as of 12:50 PM EDT.
Freeport-McMoRan (NYSE:FCX) was upgraded by Argus Research, citing the company's guidance on increasing production and the restarting of its Chino mine in New Mexico.
The rating was upgraded because it "reflects the company's decisions to increase production in 2010 and to restart its Chino mine in New Mexico, as well as continued copper purchases from China," said Argus.
Freeport also increased its FY10 earnings per share estimate from $8.03 to $8.29 and its FY11 estimate from $8.89 to $9.37. The Street at this time is looking for FY10 and FY11 earnings per share of $8.09 and $9.25.
Another impressive move by Freeport showing confidence going forward was the almost doubling of its quarterly dividend.
Freeport closed Monday at $98.28, soaring $2.21, or 2.30 percent. Argus has a price target of $113 on them.
Allied Nevada Gold (Amex:ANV) was upgraded by RBC Capital from "Sector Perform" to "Outperform."
Since the latter part of July, when Allied was as low as $15.70 a share, they've rebounded to $24.77, where they closed at on Monday. Trading volume was also over 50 percent higher than the 3-month average of 918,000.
Allied operates in the State of Nevada, with its flagship property being the Hycroft Mine, which includes gold and silver as a byproduct.
Its close at $24.77 was a gain of $1.23 on the day, or 5.32 percent. They have market cap of 2.19 billion.
Tuesday, October 26, 2010
Major gold miners Barrick Gold Corporation (NYSE:ABX), Agnico-Eagle Mines Limited (NYSE:AEM), Newmont Mining Corporation (NYSE:NEM) have all rebounded into positive territory after 1:00 PM EDT. Goldcorp (NYSE:GG) also closed in on being level, but are having trouble finding supporting in positive territory.
They are moving in conjunction with spot gold prices, which were down earlier in the trading session, but almost level, but still down by about $0.20, coming in at $1,340.10.
Goldcorp is down slightly at $42.59, losing $0.05, or 0.12 percent as of 1:08 PM EDT.
Newmont was at $59.63, gaining $0.26, or 0.44 percent. Barrick Gold has moved up to $46.73, adding $0.20, or 0.43 percent. Agnico moved up to $71.94, or $0.56, gaining 0.78 percent.
Monday, October 25, 2010
Harmony Gold Mining Co. (NYSE:HMY) and Newcrest Mining (OTC:NCMGY) are about to start their $150 million prefeasibility study at the Wafi-Golpu copper-gold project in Papua New Guinea.
According to Harmony Chief Executive Officer Graham Briggs, the mine may contain almost double the previous copper and gold resources estimated at the project.
Wafi-Golpu may have as much as 30 million ounces of gold and 8 million metric tons of copper.
So far it appears we have found “another high-quality, world-class operation in Papua New Guinea,” asserted Briggs.
Cost to construct the mine could be as high as $3 billion. The prefeasibility study should be completed by the early part of 2012.
Part of the strategy for Harmony for Wafi is to move away from the volatile and unpredictable South African market, where the ruling socialists are pushing to nationalize the mining industry.
The business-friendly Papua New Guinea is “rapidly being seen as a significant and welcoming gold region,” said Harmony in a recent statement.
They and Newcrest are also looking to increase production at their Hidden Valley mine. Gold production is expected to increase to 250,000 ounces and silver to 3.5 million ounces annually.
Drilling results by Kinross Gold's (NYSE:KGC) joint venture partner Millrock Resources (TSE:MRO) from its Council gold project in Western Alaska have been released by the company.
"At Albion, 2,062m of reverse circulation drilling in 17 holes was completed. Two holes, CNL1013 and CNL1014, intersected more than 1 g/t gold mineralization, confirming bedrock mineralization at the site. Hole CNL 1013 returned 4.6 metres at 1.4g/t gold, and hole CNL 1014 intersected 9.1 metres at 1.02 g/t gold."
Millrock said the best results of the 1990 soil samples take was 344 ppb, from the ground between the northwest-striking 900m by 2000m Albion geochemical anomaly.
"The new survey results join the Albion and northern anomaly areas along a previously undefined, northeast trend consisting of anomalous gold and pathfinder elements. The total length of this new trend is 3800m," said Millrock.
Along with eight gold-copper properties in Alaska, Millrock also has three porphyry copper prospects in Arizona.
AngloGold Ashanti (NYSE:AU) has been fairly resilient in the wake of the gold correction, and were upgraded by HSBC from "Neutral" to "Overweight."
They've dropped a little, but will rebound extremely quickly as gold prices jump again after taking a temporary breather.
Gold prices started back in the positive slowly Friday, and AngloGold moved in unison with them.
AngloGold closed Friday at $45.89. gaining $0.38, or 0.83 percent. HSBC has a price target of $58 on them, increasing it from $46.
Friday, October 22, 2010
Pan American Silver (Nasdaq:PAAS) was upgraded by Credit Suisse (NYSE:CS), as the metal continues to be one of the hotter commodities, although overshadowed by gold because of the enormous record prices it has been trading at.
Credit Suisse upgraded the from "Neutral" to "Outperform."
The ratio between silver and gold has been steadily moving back to historical proportions, giving investors another reason to invest in silver producers.
Pan Am closed Thursday at $29.80, losing $0.52, or 1.70 percent. They have a market cap of 3.19 billion.
Thursday, October 21, 2010
Amarillo Gold (TSX.V:AGC), Goldgroup (TSX:GGA) (OTC:GGAZF) Otis Gold (OTC:OGLDF) All Undervalued Junior Gold Miners
In an interview with 'The Gold Report,' the author of The Mercenary Geologist newsletter, Mickey Fulp, said he considers most junior miners overvalued, but some like Amarillo Gold Corp. (TSX.V:AGC), Goldgroup Mining Inc. (TSX:GGA)(OTC:GGAZF.PK) Otis Gold Corp. (TSX:OOO) (OTCBB:OGLDF) remain undervalued.
He likes Amarillo Gold because two of its projects have over 1.5 million ounces of "43-101 qualified resources."
Since going public, he cites 14 of the 15 months Goldgroup Mining Inc. via its Cerro Colorado mine, have positive cash flow. He basis his assessment of them being undervalued on " per-ounce-in-the-ground valuation." They also have two advanced exploration projects with resources: Caballo Blanco in southeast Mexico and San Jose de Gracia in western Mexico, said Fulp.
Last, when measured on a per-ounce basis against the overall peer group they compete against, Otis Gold Corp. is undervalued. They have the Kilgore project in Idaho, and are continuing to drill and enlarge another resource.
Led by higher copper and gold prices, Freeport-McMoRan (NYSE:FCX) soared in the third quarter, with earnings rising by 30 percent over the same period in 2009, rising to $1.2 billion, or $2.49 a share. Analysts had been looking for $2.12 a share.
Revenue was up almost by the same, increasing to $5.2 billion, rising by 27 percent from $4.1 billion last year in the same quarter. That means margins held pretty strongly for the quarter. Analysts had been looking for about $4.63 billion in revenue.
Going forward, the interest rate boost by China has left the industrial metals sector a little weaker than in the recent past, suggesting China may be cutting back on spending to cool down its economy more. That could cut into revenue and earnings in the near-term.
Freeport made a big move for it shareholders with dividends, increasing them to $2 a share, a 33 percent increase.
The diversified miner was trading at $95.86, gaining $0.51, or 0.53 percent at 1:17 PM EDT.
Gold and base metals like copper have been driving the share price of of diversified miners and gold miners up, and companies like Teck Resources Limited (NYSE:TCK), Freeport-McMoran Copper & Gold Inc. (NYSE:FCX),
Goldcorp (NYSE:GG) and Barrick Gold (NYSE:ABX) are poised to report strong third quarter earnings as a result.
While some note that the mining companies haven't been keeping up with the rise in price of metals, that isn't too relevant, as they're still moving up at a nice pace, and will continue to do so in general, with some companies obviously outperforming others.
Whether the market pays a premium or not doesn't matter, what matters is that the trajectory in general continues upward, which it is sure to for mining companies exposed to the right metals.
Mining companies will need to temper expectations by pointing to this reality, but other than that, there really isn't a downside to the market, as long as the companies continue to work on bringing costs down.
That, more than anything, will allow them to profit in almost any economic environment, as margins will continue to be solid even if revenue falls in the years ahead.
The reining in of company performances in light of the movement of commodity prices is really good for the sector, as it helps to keep share price performance closer to reality than moving in huge swings with commodity prices.
Wednesday, October 20, 2010
UBS (NYSE:UBS) took aim at some companies it feels are weak in the mining sector, and downgraded New Gold, Inc. (Amex:NGD), Hecla Mining (NYSE:HL), Thompson Creek Metals (NYSE:TC).
Hecla was downgraded from "Buy" to "Neutral," New Gold from "Buy" to "Neutral," and Thompson Creek Metals was cut from "Buy" to "Neutral" as well.
Thompson Creek Metals closed the trading day Tuesday at $10.76, losing $0.82, or 7.08 percent.
Hecla Mining dropped to $6.60, dropping $0.56, or 7.82 percent. UBS has a price target of $7.75 on them, increasing it from $6.75.
New Gold fell to $6.46, declining $0.56, or 7.98 percent. They have a price target of $7.25 on them from UBS.
NovaGold (AMEX:NG), Eldorado (NYSE:EG), Ivanhoe (NYSE:IVN), Gammon Gold (NYSE:GRS) Crushed as Gold Prices Plunge
With the gold sector poised for a correction and the rise in the U.S. dollar in response to comments by Treasury Secretary Timothy Geithner, along with China's decision to raise interest rates, provided the impetus for a sharp drop in gold prices, which embraced gold miners like NovaGold (AMEX:NG), Eldorado (NYSE:EG), Ivanhoe (NYSE:IVN) and Gammon Gold (NYSE:GRS).
Speculators and traders have been waiting for the type of news that would slow down the unprecedented rise in gold prices, and that happened, pushing gold prices down and along with it the broader gold market.
While the major gold miners like Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG) and Newmont Mining (NYSE:NEM) all dropped by over 4 percent Tuesday, smaller miners like those mentioned above, expectedly, fell by even more, with the exception of Ivanhoe.
Eldorado closed at $17.02, falling $1.01, or 5.60 percent. Ivanhoe Mines ended Tuesday's session at $22.85, losing $1.10, or 4.59 percent. Gammon, the smallest of this bunch, dropped to $6.80, falling $0.39, or 5.42 percent. NovaGold was off the most as measured by percentages, closing at $8.61, shedding $0.70, or 7.52 percent.
Gold prices today plunged, bringing a lot of gold miners down with it, including AngloGold Ashanti (NYSE:AU), which had been upgraded from "Neutral" to "Outperform" by Macquarie.
Gold for December delivery plunged to $1,336, losing $36.10 at the close of floor trading in New York. It has dropped to as low as $1,332.50 earlier in the day.
That temporarily overcame the outlook for AngloGold Ashanti, as it fell to $45.25,losing $1.77, or 3.76 percent.
Volume was a little heavier than its daily average over the last three months.
Gold prices were down because of a stronger U.S. dollar and China's decision to raise interest rates.
Barrick (NYSE:ABX), Newmont (NYSE:NEM), Goldcrop (NYSE:GG) Plunge Over 4 Percent as Gold Prices Fall
Barrick (NYSE:ABX), Newmont (NYSE:NEM), Goldcrop (NYSE:GG) all dropped with the broader gold sector, as gold prices plummeted on the comments from Treasury Secretary Tim Geithner that "No country around the world can devalue its way to prosperity."
Of course that's what has been happening for decades (devaluing dollar) and will continue to happen, but it was the right thing to say in order to give some breathing room to the U.S. dollar and slow down the rise of gold prices so it doesn't expose the folly of Federal Reserve policies and the refusal of the government to rein them in.
Gold was ready for a correction after its recent breathtaking climb, and speculators were waiting for something to give them a reason to take profits, which they did.
Gold miners had made moving up with the price of gold as well, so a correction was timely for them too.
Barrick closed at $45.46, losing $2.36, or 4.94 percent. Goldcorp ended the session at $42.00, dropping $2.00, or 4.55 percent. Newmont stood at $59.93 at the end of the day, shedding $2.56, or 4.10 percent.
Volume was significantly above the daily three-month average.
Tuesday, October 19, 2010
Although there have been a lot of positive comments and data presented on the future of Yamana Gold (NYSE:AUY), it continues to struggle to gain respect and traction in a gold investment climate that should result in a much better price movement for the gold miner.
Scotia interrupted the attempted party again, downgrading Yamana from "Sector Outperform" to "Sector Perform."
With analysts having eight "strong buy" ratings, six "buys," and four holds" on Yamana, we will probably see more downgrades for them in the near future.
Most people continue to hold out hope that Yamana will take off, and yet it continues to linger, even though it does seem to have a number of reasons to be a solid investment and outperformer.
Their extremely low production costs alone make it a desirable company, coming in at a little over $100 a gold-equivalent ounce.
That gives them a lot of flexibility and enables them to operate in weak and strong markets when competitors would flounder.
Yamana also has significant metal resources like zinc, copper, molybdenum and silver, all of which are positioned to move up nicely in price, especially copper and silver.
From last year at this same time, Yamana has generated a loss for its share price, closing Monday at $11.17, losing $0.10, or 0.89 percent.
Monday, October 18, 2010
Marc Faber Likes Ivanhoe (NYSE:IVN), Barrick (NYSE:ABx), Novagold (NYSE:NG), Gold Fields (NYSE: GFI), Newmont (NYSE:NEM)
Marc Faber, the contrarian investor and the real Dr. Doom of the marketplace, has been pushing the value of investing in gold for a number of years. He recently named the gold miners he likes at this time, which are Ivanhoe Mines (NYSE:IVN), Barrick Gold (NYSE:ABx), Novagold (NYSE:NG), Gold Fields (NYSE:GFI), Newmont Mining(NYSE:NEM), Gabriel Resources (TSE:GBU), Centamin Egypt (TSE:CEE) and Sprott Resource (TSE:SCP).
A little suspect is his Novagold pick, as he was recently named to the board of the company.
Barrick and Newmont are obvious as the large-cap miners. Ivanhoe is also among my favorites over the long term, although once their Oyu Tolgoi mine gets going, they will be more like Freeport-McMoran (NYSE:FCX) than primarily a gold miner, as the copper resources there are vast, although so are the gold resources.
Faber recently stated that he believes gold is still inexpensive, and investors should allocate resources to it on a monthly basis.
Friday, October 15, 2010
Silvercorp (NYSE:SVM), Pan American (Nasdaq:PAAS), Hecla (NYSE:HL), Endeavour (AMEX:EXK), Silver Wheaton (NYSE:SLW) Soaring with Silver
Silver prices are soaring and silver miners and royalty companies like Silvercorp (NYSE:SVM), Pan American (Nasdaq:PAAS), Hecla (NYSE:HL), Endeavour (AMEX:EXK) and Silver Wheaton (NYSE:SLW) have been soaring with them.
Even though their valuations are high, they may have a lot more room to grow than even most gold miners, who have been the recipients of a 10-year long gold bull run.
Having mentioned valuation, the lowest silver company in the group mentioned above is Pan American Silver, and they could be one of the companies ready to make a big move, as the others have participated more fully in the silver price boom.
Although Pan American Silver closed slightly down Thursday, finishing the day at $30.85, losing $0.06, or 0.19 percent, they could be a sleeper that is poised for a big move.
Silvercorp Metals made a big move, closing at $9.42, gaining $0.52, or 5.84 percent. Hecla moved up to $7.06, rising $0.13, or 1.88 percent. Royalty company Silver Wheaton finished up to $27.84, climbing $0.36, or 1.31 percent. Endeavour Silver also made a major move, closing at $4.99, up $0.24, or 5.05 percent.
African Barrick Gold (LSE:ABG), the spin-off from Barrick Gold (NYSE:ABX), is becoming a disaster, as poor management and what appears to be a grossly incompetent human resources department are causing the company to lower production forecasts for the second time in the last 60 days or so.
The inability to protect their assets and hire good people has caused the gold miner to lower their gold production estimates from 800,000 to 850,000, down to 716,000. That was in relationship to the original numbers.
Gold production targets had been downwardly revised to 750,000-800,000 ounces in between that time.
Allegedly a criminal syndicate infiltrated the Buzwagi mine and stole fuel from the facility. Consequently 60 workers were suspended, along with several contractors.
Responding far too optimistically in our opinion, Numis Securities analyst Cailey Barker said in a research note, "We remain cautious in the short term on ABG but still remain firm on the longer term re-rating prospects from a low 1.1xNAV (net asset value), making this one of our key picks in the mid-tier gold sector."
I wouldn't touch this stock until the obvious corruption in the company is completely rooted out.
One step taken was to appoint a new general manager at the mine with 28 years of experience in mining, Boyd Timler.
But at this time it's not an experience issue, but a character issue. If African Barrick doesn't completely clean house, this will happen over and over again. Somebody is obviously turning their head the other way and allowing it to happen.
Thursday, October 14, 2010
Morningstar (Nasdaq:MORN) said they are raising their fair value estimate for Freeport-McMoRan (NYSE:FCX) by $4 a share on the soaring price of gold.
"We are raising our fair value estimate for Freeport-McMoRan FCX by $4 per share to reflect the rapid appreciation we've seen in gold over the past few months. In contrast to our long-term price forecast for copper, which is informed by our view of the likely path of supply and demand in the coming years, we rely on the futures curve for our gold price estimate. With the yellow metal now trading at $1,374/oz in the spot market, up from a third-quarter average of $1,227/oz, the valuation implications for Freeport, which is on pace to produce 1.8 million oz this year (down from 2.6 million oz in 2009 due to mine sequencing at Grasberg), are significant," said Morningstar on their Website.
This is important because Freeport and other miners who aren't considered primarily a gold mining company, historically haven't traded at the premiums a large number of perceived pure gold miners have.
So for Freeport to have its fair value raised based on its gold assets could help the company rise in price even more, as the future of its copper business should continue add significant value to the company and its shareholders.
Concerning copper, Morningstar added, "Our higher published fair value estimate also includes the effects of the recent surge in copper prices, now at $3.81/lb in the spot market (thanks, China!), up from a third-quarter average of $3.29/lb."
Freeport is the second-largest copper producer in the world, and can produce up to 1 million ounces of gold at their Grasberg mine. They're also the No. 1 producer of Molybdenum.
Freeport was trading at $99.46, gaining $0.38, or 0.38 percent, at 1:48 PM EDT.
Kinross (NYSE:KGC), Yamana (NYSE:AUY), NovaGold (AMEX:NG), Agnico-Eagle (NYSE:AEM) Rise on Anticipated QE
With the U.S. government finally admitting the U.S. economy is going to continue to struggle through 2011, the Federal Reserve is preparing people for their latest inflationary step (now being called quantitative easing), and gold miners like Kinross Gold Corp (NYSE:KGC), Yamana Gold (NYSE:AUY), NovaGold Resources Inc. (AMEX:NG) and Agnico-Eagle (NYSE:AEM) are all rising with the broader gold sector, as are the vast majority of gold miners.
Gold has been having quantitative easing priced into it, but unknowns like how much money the Federal Reserve will print to buy more government debt, and how much the amount of that debt will be, keeps the price of gold rising.
That's only part of the story though, as the U.S. dollar continues to drop in value, and other central banks around the world have been implementing, or are about to implement, similar measures, which is why gold prices have been risings against a number of currencies, one of the more important things to consider in relationship to gold prices.
Other factors driving up the price of gold are the sovereign debt crisis in Europe which won't go away, low interest rates, and the recessionary economies of the West. None of which are going to change in the near future, and probably not for several years.
Kinross closed Wednesday at $19.66, gaining $0.72, or 3.80 percent. Yamana Gold (NYSE:AUY) ended the session at $11.75, rising $0.25, or 2.17 percent. NovaGold soared to $9.59, up $0.37, or 4.01 percent. Agnico-Eagle closed at $74.17, rising $2.00, or 2.77 percent.
South African miner AngloGold Ashanti (NYSE:AU) was upgraded by Anglogold Ashanti (NYSE:AU) from "Sell" to "Neutral." That's an upward move of two notches for the gold miner.
Earlier in the month Anglogold was upgraded from "Underperform" to "Neutral" by Credit Suisse (NYSE:CS).
Anglogold also eliminated their hedge book recently, now standing in full exposure to gold.
The gold miner closed Wednesday at $48.12, gaining $1.32, or 2.82 percent.
volume was over double the usual 3-month daily average of 2,130,010, rising to 4,538,356, according to Yahoo Finance.
Canaccord Genuity announced it is raising its price target on Gammon Gold Inc. (NYSE:GRS), citing Ocampo production and valuation. Canaccord maintains a "Hold" on Gammon.
"Gammon recently released Q3/10 operating results from its 100%-owned Ocampo Au/Ag operation in Mexico. We have also increased our peak Au and Ag assumption, which we apply to Ocampo in our valuation, to US$1,500/oz Au from US$1,300/oz Au and to US$25/oz Ag from US$21.5/oz Ag. The net-net result is an increase in our target price," said Canaccord.
Gammon recently announced production at its Ocampo mine increased by 10 percent over its last quarterly production result.
Gammon closed Wednesday at $7.35, gaining $0.31, or 4.40 percent. Canaccord has a price target of C$8.50 on the gold miner, up from C$7.50.
Wednesday, October 13, 2010
Eldorado Gold Corp Ltd (NYSE:EGO); Gammon Gold Inc. (NYSE:GRS) Ivanhoe Mines Ltd (NYSE:IVN) are all moving higher with more record gold prices today, as the economic conditions remain conducive to ongoing gold strength.
Gold skyrocketed to another record high Wednesday, exploding to as high as $1,375.70 for December delivery. Spot gold was up over $20, rising to $1,370.70 at a little after 1:30 PM EDT>
Gammon Gold rose to $7.34, gaining $0.30, or 4.33 percent as of 1:35 PM EDT. Eldorado was up to $18.81, gaining $0.39, or 2.12 percent at 1:37 PM EDT. Ivanhoe made a move to $18.81, gaining $0.40, or 1.63 percent, also at 1:37 PM EDT.
Gold prices continue to move up on the inevitable resumption of inflationary spending by the Federal Reserve, otherwise known as quantitative easing.
Freeport-McMoRan Copper & Gold (NYSE:FCX), Newmont Mining (NYSE:NEM) and Goldcrop (NYSE:GG) made nice upward moves today as the price of gold soared to another record high, with December delivery gold prices reached as high as $1,375.70.
Spot gold was at $1,370 a 1:25 PM EDT.
Freeport was among the leaders in the sectors, pushing up to $99.45, gaining $4.32, or 4.45 percent at 1:25 PM EDT
Goldcrop was up to $45.26, gaining $1.29, or 2.93 percent, and Newmont rose to $63.04, gaining $1.04, or 1.68 percent at 1:25PM EDT as well.
Tuesday, October 12, 2010
Lately I've been seeing quite a few analysts calling for a top in gold. I have to say these analysts don't really understand what's happening. If they did they would know that far from topping, gold is just getting started.
Let me show you a long term chart of the US dollar so you can get a clear picture of what is unfolding.
About every 3 to 3 1/2 years the dollar drops down into a major cycle low. I call it the 3 year cycle low but the average duration is 3 years and 3 months trough to trough. The dollar is now on its way down into that major bottom. After a brief bounce off the `08 all-time lows of 71 later this year I expect we will see the dollar roll over early next spring as the final plunge begins and the currency crisis reaches a climax.
Next let me show you a chart of the smaller daily cycle.
This smaller daily cycle tends to run about a month (18 to 25 days)trough to trough. We are now deep in the timing band for this cycle to bottom. Once it does (it may have on Thursday) we should see a weak rally, possibly back up to test the all important pivot at 80. That should pressure stocks and gold down into their respective cycle lows. I suspect many will take this as a sign that gold's run is over. It won't be.
Gold's drop into the now due cycle low shouldn't last more than 4-8 days. That's about how long we can expect the dollar rally to last as it will only be a dead cat bounce to relieve oversold conditions and ease sentiment extremes. Then the dollar will roll over into another decline that should bottom in early November and will likely test the 74 pivot. Again after another weak rally the dollar will crash down into a daily, intermediate and yearly cycle bottom that should test the `08 lows at 71. That is the point where the gold rally should take a more significant rest.
As I noted in the above chart the intermediate dollar, and gold cycle for that matter, runs on average 20 weeks. Last week marked the 9th week of the dollars intermediate cycle. It's way too early to look for a major bottom yet. If the cycle runs the "normal" 20 weeks then we won't get an intermediate bottom until late December. Considering the last yearly cycle low came in early December of `09 mid December should be a fairly accurate target for an intermediate bottom.
I can assure you that while the dollar crisis intensifies this winter gold will not be sitting still and it certainly won't be topping. As the dollar crashes down to test the `08 lows I expect we will see gold rocket to at least $1450 and $1550ish is probably a more realistic target.
But don't forget the larger three year cycle low isn't due to hit until next spring/summer. The dollar rally out of the yearly cycle low in December will also be a dead cat bounce, although it should last at least a month or two, but ultimately it too will fail and the true consequences of Bernanke's monetary policies will come home to roost as the dollar crashes down into the three year cycle bottom and the currency crisis reaches a climax next year.
That will drive the final leg up in this huge C-wave advance, possibly as high as $1700 -$1800.
So yes gold is due for a minor corrective move but it is a long way from the final topping process of the current C-wave that began in April of last year when the B-wave decline tested 850 which by the way was the top of the 1980 bull market.
Folks we are never going to see $850 gold again. And I seriously doubt we will ever see $1200 gold for the remainder of this bull market.
With very little upward movement from March, Harmony Gold (NYSE:HMY) continues to be looked upon as negative, and Morgan Stanley (NYSE:MS) reflected that with their downgrade of the South African gold miner from "Overweight" to "Equalweight."
Just being in based in South Africa is a negative for any gold miner, as so-called "black empowerment" and surging energy costs are considered a negative by those wishing to invest in gold companies.
Harmony experiences both of those, although they're compliant on the black empowerment initiative.
Morgan Stanley had initiated coverage on Harmony in June 2009, starting them off at that time with the "Overweight' they just lost.
Harmony was at $11.37, losing $0.12, or 1.04 percent as of 2:47 PM EDT.
Goldman Sachs (NYSE:GS) upwardly revised its 12-month estimate for gold prices, increasing them from previous 12-month projection of $1,365 to $1,650. Gold is already closing in on the prior numbers.
Also increased was the three-month and six-month gold price estimate by Goldman, which rose to $1,400 an ounce and $1,525 an ounce.
Goldman said in a note to clients, "With U.S. real interest rates pushing lower off the slowdown in the pace of the U.S. economic recovery and the growing prospect of another round of quantitative easing, we expect gold prices to continue to climb."
Expectations are inflating the money supply, or quantitative easing, will be again put into place in November 2010.
Until those misguided policies change, gold prices will continue to move up, although there will surely be occasional corrections along the way.
Monday, October 11, 2010
Gold prices today plummeted in morning trading, as on the Comex division of the New York Mercantile Exchange they dropped to as low as $1,341.10.
Spot gold also rebounded to surpass the $1,350 an ounce mark, also dropping to almost $1,340 earlier in the trading session.
Major gold miners like Barrick Gold (NYSE:ABX), Newmont Mining (NYSE:NEM) and Goldcorp (NYSE:GG) were all still down at about 1:00, although Barrick was closing in on going positive.
SPDR Gold Trust (NYSEArca:GLD) has risen to $132.29, gaining $0.63, or 0.46 percent.
Kinross Gold Corporation (NYSE:KGC), Eldorado Gold (NYSE:EGO) and Agnico-Eagle Mines Limited (NYSE:AEM) were all flirting with going into positive a little after 1:00 PM EDT as well, as gold prices continue to slowly rise in afternoon trading.
Friday, October 8, 2010
Barrick (NYSE:ABX), Ivanhoe (NYSE:IVN), Eldorado (NYSE:EGO), Agnico (NYSE:AEM) Rise with Surging Gold Prices
The jobs report in the U.S. showing further terrible results have gold prices today jumping and gold miners rising with them. Barrick Gold (NYSE:ABX), Ivanhoe Mines (NYSE:IVN), Eldorado Gold and (NYSE:EGO) and Agnico-Eagle Mines (NYSE:AEM) are all in positive territory in anticipation of the inevitable inflationary move by the Federal Reserve, which will pump more money into the American economy.
Ivanhoe Mines made the highest move of the gold miners mentioned above, rising to $24.59, gaining $0.86, or 3.62 percent, as of 2:40 PM EDT. Following them was Agnico, which pushed to $72.78, a gain of $1.38, or 1.93 percent. Barrick also increased, standing at $48.40, adding $0.72, or 1.51 percent. Eldorado finished the grouping off, rising to $18.57, an increase of $0.21, or 1.14 percent.
A number of diversified miners also benefited from the fall in jobs, anticipating higher metals' prices because of the falling value of the U.S. dollar, which will worsen from the Federal Reserve's inflating of the money supply.
Commodity prices in general will continue to increase in price because of the falling value of the U.S. dollar and inflation from the Federal Reserve's actions.
As the economic news continues to get worse, gold investors continue to push gold prices up as expectations the Fed will inflate or implement quantitative easing sometime soon, grows.
Gold futures' prices today have surged to $1,346.20 for December delivery, rising $11.20 on the Comex in New York.
Also continuing to fuel the gold price bonanza is the ongoing collapse of the U.S. dollar.
Much this is being precipitated by the release of the job report today, which showed another 95,000 jobs being shed. That has caused most to believe the Federal Reserve will inflate again sometime very soon. They've indicated numerous times in the last couple of months they're ready and willing to do it if they perceive the need to. Since they always perceive the need to, it's a surety they're going to.
That will continue to put downward pressure on the U.S. dollar and push the price up gold up even further.
Finally, there is the resultant inflation which will come from further pouring of money into the economy, which also works to gold's advantage. The perfect storm for gold prices continues, and nothing will hinder that from continuing on for a long time.
As Randgold (Nasdaq:GOLD) continues on its torrid upward share price move, some analysts are starting to get nervous about the company being too pricey to buy at this time, as valuations are high.
So far in 2010, Randgold has risen even faster than the exploding gold prices, adding to the concern investors may want to wait for them to pull back before putting more money into the company.
In 2010 Randgold shares have increased by about 27 percent, generating the concern of if they can continue to move up based on a forward price-to-earnings basis. In that regard they do seem expensive.
The company has also said gold production for the full year will be less than original estimates, dropping from 470,000 to around 455,000.
Increasing costs are also a concern, as the grew to $665 an ounce in the prior quarter.
CEO Mark Bristow has said over the mid- to long-term, hitting better grades will help bring down cash costs.
In the overseas markets the work in, the U.S. dollar won't help them as it continues to weaken, as the other currencies have remained pretty level against them.
Other inputs have also remained stable. So if better grades are hit and gold prices continue to rise, Randgold will have a lot of room to move upward, including new projects coming online.
If it takes a significant amount of time to cash in on better grades, then Randgold could experience downward pressure until the company catches up with it.
Long term they should continue to do well, although short term they could come under pressure.
Thursday, October 7, 2010
Citing expected quantitative easing, which is another word for inflation, to be instituted by the Federal Reserve, Citigroup (NYSE:C) sees gold prices over the near and medium term to rise to $1,450 an ounce.
That is based on the accurate assumption the value of the U.S. dollar and other currencies will fall against gold as they continue to be debased from the faulty policies of their central banks.
Gold, as expected, is experiencing a pullback today as it had been moving up at unsustainable levels, where investors were over-pricing the future into the precious metal.
Gold for immediate delivery did surge earlier in the session to $1,364.77 before falling back.
Whatever type of correction may come, it's largely irrelevant for gold investors, as there is absolutely nothing in the way at this time which will change the support underlying the surge in gold prices.
News of the ongoing sovereign debt crisis in Europe being worse than being spun by the mainstream media is part of that support for gold, along with expected inflation, weakening currencies, low interest rates, and numerous other factors.
A basket of currencies falling against the price of gold is among the more important supports that will continue because of the enormous printing of money.
With gold prices expected to continue climbing for years into the future, a growing number of gold miners have been eliminating their hedge books. AngloGold Ashanti (NYSE:AU) has now completed the process.
Over the last three years, Anglogold said they've created close to $40 billion in value for their shareholders, at a cost of closing the hedge book contracts of $2.63 billion.
The buy-back price on average was close to $1,300 an ounce for the final tranche of restructuring their hedge.
Gold prices pulled back today, pressuring the share price of Anglogold, where they dropped to $45.96, falling $1.56, or 3.28 percent, as of 1:41 PM EDT.
Goldman Sachs (NYSE:GS) issued $66.5 million in structured notes linked to gold, as prices continue to break all-time records and solid support continuing for the precious metal.
There is no interest on the notes, as investors receive profits at maturity, with a price cap of 17 percent. The securities, which were sold on October 1, are for one year. JPMorgan Chase (NYSE:JPM) is the distributor for Goldman.
Investors in the notes have their principal protected at maturity unless prices drop by over 20 percent below the entry level price of $1,316.25 on any given day.
The notes aren't backed by gold bullion as ETFs are, but by the credit of Goldman.
The securites issued by Goldman are basically bonds bundled with derivatives. Investors reportedly have been buying them as a brisk pace.
Bloomberg data show structured note linked to gold have grown to $109.8 million in September, over three times the $35.6 million issued in August.
As gold prices continue to break records on a weekly basis, projections continue to rise based on a number of factors, and Morgan Stanley (NYSE:MS) has raised its forecast for gold prices in response.
Morgan Stanley, "Accelerating weakness in the U.S. currency, driven by fears of renewed quantitative easing to confront sluggish U.S. growth, is proving to be a boon to commodity markets."
At a support level, Morgan sees gold holding at about $1,315 for 2011, while under a bull scenario rising to as high as $1,512.
Morgan noted they like other commodities and commondity stocks, including copper and iron ore. They see iron ore rising to $135 a ton in 2011.
Two copper companies they like are Kazakhmys Plc and Xstrata Plc.
Wednesday, October 6, 2010
Almost everything reported concerning the U.S. economy today confirms the ongoing recession, and Goldman Sachs (NYSE:GS) believe there's no doubt the Federal Reserve will inflate via quantitative easing, adding more support to gold, although that's probably priced into the price of gold at this time.
How much it's priced in will be determined by what the Federal Reserve does and to what extent.
There's no doubt the U.S. dollar will continue to weaken, which will benefit gold, and lower interest rates will remain in place.
News today that the sovereign debt of Greece had been understated and will have to be upwardly revised for the last several years is good for gold, as well as the downgrade of Ireland debt by Fitch Ratings and is being watched closely by Moody's (NYSE:MC), mostly on concerns over the cost related to the banking sector in the countries.
Private employers in America also reported they cut 39,000 jobs in September, where analysts were looking for an increase of 24,000 for the month.
Currencies in other countries continue to weaken against gold as well, confirming there is no bubble in gold, and nothing is out there which would suggest that should or will change any time soon.
Credit Suisse (NYSE:CS) has upgraded Gammon Gold (NYSE:GRS) from "Underperform" to "Neutral."
Gammon has struggled through the last year, although after bottoming out in July, they've gradually been coming back. They reached a high of $12.63 during that time.
They just signed a deal with Capital Gold Corporation (AMEX:CGC) acquire them, giving Gammon an even stronger presence in Mexico.
Gammon Closed Tuesday at $6.99 a share, gaining $0.18, or 2.64 percent.
Credit Suisse increased the price target on Gammon from $6.50 to $7.50.
Gold prices pulled the entire gold sector up with them today, with Market Vectors Gold Miners ETF (NYSEArca:GDX) and SPDR Gold Trust (NYSEArca:GLD)breaking records themselves.
Gold settled Tuesday at $1,340.30 an ounce, skyrocketing by $23.50.
Market Vectors rose to an all-time high of $58.83, before closing at $57.25, gaining $1.71, or 3.08 percent on the day. SPDR ended the day at $130.99, rising $2.53, or 1.97 percent. Both were way above their daily trading volume.
The U.S. Dollar Index plummeted 0.9 percent to 77.75, the lowest level since the middle of March 2010.
Gold miners performing strongly included Yamana Gold (NYSE:AUY), which shot up by $0.45, to close at $11.73, gaining 3.99 percent. Harmony Gold Mining Co. Ltd. (NYSE:HMY) surged $0.60 to close at $11.84, an increase of 5.34 percent. Ivanhoe Mines Ltd (NYSE:IVN) also skyrocketed, closing the day at $24.46, gaining $1.12, or 4.80 percent.
In an effort to raise $152 million, OceanaGold (TSE:OGC), which is NZX-listed, is offering a private placement, with Citigroup Global Markets Canada (NYSE:C) and Macquarie Capital Markets Canada underwriting the placement, agreeing to acquire special warrants and common shares in OceanaGold for C$3.50 each.
The purpose is to fund its gold and copper mine in the Philippines, while also expanding its gold mines in New Zealand.
A trading halt has been placed on OceanaGold, which is listed on, along with the New Zealand exchange, on the Australian and Toronto exchanges as well.
Other funding is being considered for its Didipio project in the Philippines, as this funding is targeted for the Reefton and Macraes gold mines.
The offering has a closing date of October 20.
Tuesday, October 5, 2010
There seems to be know doubt from the market that the Federal Reserve is going to foolishly launch another round of quantitative easing, further debasing the value of the U.S. dollar. That has gold prices continuing to break records in anticipation of the event, surpassing $1,340 today.
What is even more important for those who understand the significance of this, is it's not only the U.S. dollar gold is gaining against, but a number of other currencies as well. In part that means other countries around the world are participating in the same measures, which is also debasing their currencies.
The quick upward move in gold futures and spot gold is from the market pricing in the actions of the Federal Reserve almost immediately, rather than waiting. Of course there are numerous other factors driving gold prices, but in the short term this is the one everyone is watching closely now.
Investors around the world are escaping their weakening currencies in favor of gold, which is increasingly being considered a currency by many who hadn't thought that way in the past (there has always been some who have).
Around mid-day gold futures for December delivery hit as high as $1,341.20 on the Comex division of the New York Mercantile Exchange; the highest ever for a most-actively traded contract.
With Ben Bernanke in ultimate denial about the disaster of the earlier round of quantitative easing, even alleging it was successful, gold investors know they're in for a long upward ride as he continues his outrageous policy and damage to the U.S. dollar.
This all means that inflation will start to rise soon, adding even more fuel to the fire. All of this is to the benefit of gold.
Major gold companies have strongly participated in the upward run today, including Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG) and Newmont Mining (NYSE:NEM).
Barrick increased to $47.51, gaining $1.53, or 3.33 percent, Goldcorp rose to $44.34, rising $1.42, or 3.31 percent, and Newmont reached $64.57, growing by $1.83, or 2.92 percent, all at 12:20 PM EDT.
Citigroup (NYSE:C) cut Freeport-McMoRan (NYSE:FCX) from its "Top Picks Live" list, citing recent valuation.
Increase in copper and gold prices has pushed the stock up to levels that Citigroup seems to think are unsustainable, as the share price of Freeport drop in response.
Even so, Citi is maintaining a "Buy" on the firm, saying "the company's
growth prospects, discounted valuation relative to copper futures, free
cash generation, and history of capital return."
Without a hedge and heavily exposed to gold and copper, there is also an increased volatility factor to consider.
But having said that, the continuing loss in value of the U.S. dollar could make Freeport one of the higher performing miners.
Freeport closed at $87.23 Monday, falling $1.90, or 2.13 percent. Citi has a price target of $92 on the miner.
Monday, October 4, 2010
Although it varies from financial institutions to financial institution, wealthy clients of Citigroup (NYSE:C) and UBS (NYSE:UBS) have been acquiring large allotments of gold, especially clients of UBS.
Regional head for central, eastern and northern Europe Citigroup, Africa and Turkey, Samir Raslan, said clients are buying gold, although they weren't going overboard on it.
At the Global Private Banking Summit, UBS executive Josef Stadler was far more upbeat, saying wealthy clients have been buying gold bars by the ton, removing assets from the financial system.
UBS is advising clients to put between 7 percent and 10 percent of their assets in gold, or other precious metals.
Continuing weak economic data from the U.S., along with European sovereign debt fears continue to be a major factor in the decisions, although the primary driver of gold prices is the failed policies of the central banks which are poised again to implement quantitative easing.
All of this has resulted in gold rising not only against the U.S. dollar, but other currencies as well, making it even more attractive because of the volatile economies around the world.
There is little to suggest this is going to change in the near term, so gold will continue to rise and wealthy investors will protect some of their assets with the safe haven metal, as well as other precious metals. Gold and silver will remain kings in this sector for now.
Mining giant Barrick Gold (NYSE:ABX) has finished its sale of the Osborne copper/gold mine, based in Queensland, to Ivanhoe Australia (ASX:IVA).
Ivanhoe Australia CEO Peter Reeve said, “The acquisition of the Osborne copper/gold operation has fundamentally altered Ivanhoe Australia’s development path and will allow us to become a significant base-metals producer much earlier than we originally expected.”
Ivanhoe Australia paid A$17.4-million for the project, with Barrick also getting a 2 percent net return smelter royalty from the deal, which is capped at A$15 million.
Ivanhoe will also pick up all the A$18.4 million in environmental obligations related to the project.
Production at the Osborne facility is expected to begin 2011 with molybdenum and rhenium ore being the first in line to be processed.
Harmony Gold (NYSE:HMY) announced it has entered a binding preliminary agreement with Scorpio Gold to acquire all of its Caribou Gold Property.
A press release from Scorpio said, "Subject to due diligence, definitive documentation and regulatory approval, the binding preliminary agreement (the "Agreement") gives Harmony the right to acquire a 100% interest in the Caribou Gold Property located in Halifax County, Nova Scotia, including certain equipment and other mining assets held by Scorpio and located on the Caribou Gold Property (the "Option"). Scorpio holds an option acquire a 100% registered and beneficial interest in the Caribou Gold Property, subject to a net smelter return royalty of 2.5% held by the underlying owner, John Logan Enterprises Ltd."
Terms of the deal include an upfront payment of $25,000, on the execution of the agreement. Upon approval by the TSX Venture Exchange, Harmony will pay out another $225,000 within five business days, and another $250,000 within a year from the date of acceptance.
Along with those payments, Harmony will have to spend a minimum of $1 million in exploration and development costs no longer than 12 months from the acceptance date. Of that, $800,000 of that must be spend by March 1, 2011.
Also within five business days of the acceptance date, Harmony is required to issue 3 million shares in its company to Scorpio. They also must pay to John Logan Enterprises all advance royalty payments or claim renewals in relationship to the net smelter return royalty, specifically a $250,000 advance royalty payment to be made by April 25, 2011.
All of this must be satisfied for them to get 100 percent control of the asset.
Goldcorp (NYSE:GG), Yamana (NYSE:AUX), Barrick (NYSE:ABX), Extorre (TSE:XG) and Argentine Glacier Law
The new glacier law in Argentina, which was approved by the Argentine Senate, and which President Cristina Fernandez has said she will sign, has generated some concern for the mining industry, especially gold miners in the country.
Fortunately, most of this is posturing and show, as very little in the way of mining will be affected by the law, either now or in the future.
Companies with projects in the country like Goldcorp (NYSE:GG), Yamana (NYSE:AUX), Patagonia (OTC:PATAF) and Extorre (TSE:XG) shouldn't have any problems as all, as they don't have mines in the zone being supposedly protected.
What this does is give the appearance of the government protecting the region, when in fact there is really little to be protected because no one is mining the area.
The new law will limit any economic activity in areas close to glaciers in the country.
As far as mining exposure in Argentina, Goldcorp now has it through their recent acquisition of Andean Resources, whose flagship mine is the Cerro Negro gold-silver mine being developed in the country. That won't be affected by the new law.
Extorre Gold Mines is developing the Cerro Moro gold mine, Yamana the Agua Rica copper-gold- molybdenum mine, and Patagonia Gold PLC (OTC:PATAF) its Lomada project. All of which won't be affected by the new law.
There is one exception to this, and that is Barrick Gold Corp. and their huge Pascua Lama gold and silver mine.
Radical environmental groups have attempted to derail the project, saying the company has been destroying glaciers through their practices.
Rodrigo Jimenez, Barrick vice president of corporate affairs said, "We do not mine on glaciers and, in fact, Barrick has already implemented a comprehensive range of measures to protect them as well as other sensitive environmental areas around both the Veladero mine and the Pascua-Lama project."
It remains to be seen if environmentalists use the new law to attempt to disrupt the project. They almost assuredly will.
Barrick has began the construction of the mine after many legal battles and challenges. Now they are waiting on an agreement between between Chile and Argentina over a tax-sharing agreement, and permits.
In a recent note to clients, Bank of America Corp (NYSE:BAC) said quantitative easing by the Federal Reserve will put upward pressure on gold prices, as the U.S. economy continues to sputter.
Bank of America said, "Since the first round of QE, precious metals have perhaps become the biggest beneficiary of money printing. In a way, gold is playing out as a second act of the credit bubble, with the first act being the spike in TED spreads that started back in August 2007.
"Just as commercial banks became extremely distrustful of each other's credit profile due to the severe drop in US house prices, Central Banks are quickly becoming distrustful of each other on the back of widening sovereign credit spreads, unilateral policy moves to ease quantitatively or unexpected interventions in the foreign exchange markets."
The Fed continues to hint, through various representatives, that they are ready to intervene in the market again if the American economy doesn't improve. Almost every week as data confirms things will remain slow for some time, someone from the Fed mentions quantitative easing as the remedy.
That will further erode the value of the U.S. dollar, which continues to fall against the euro. That will also push the price of gold higher and increase inflation. All of which is good for investors in gold.
Friday, October 1, 2010
Goldcorp (NYSE:GG) has lagged the surge in gold prices in 2010, up only about 7 percent, while gold prices have soared by 17 percent so far.
A couple of concerns are missing their numbers last quarter, falling 2 cents a share below earnings expectations of 29 cents a share. The other is the acquisition of Andean Resources for $3.4 billion, which came with a 35 percent premium.
In an interview with The Street, CEO Chuck Jeannes said he didn't feel Goldcorp overpaid for Andean.
Jeannes said, This is one of those once-in-a-decade kind of opportunities that comes around. It's a very high-quality deposit which in our business means extremely low cost, both capital cost and operating cost, and it's got the opportunity to grow significantly over many, many years ... so we think actually the price we paid is accretive to Goldcorp's shareholders particularly on cash flow per share."
As far as how quickly it'll be accretive to the earnings of the company, Jeannes said starting in 2013 and onward there should be "significant accretion."
When queried about organic growth, Jeannes said the company wants to grow organically, which he described as exploration at existing projects, as well as via acquisitions.
Even though Andean will make the company better, Jeannes said without it the gold miner was still growing at a projected rate of 50 percent annually over the next five years.
So while they didn't need Andean for growth, it has made them a stronger company going forward, concluded Jeannes.
For the eighth quarter in a row gold prices have ended in positive territory, as everything which supports gold remains in place.
Adding to the recent push is the realization we're still in a recession, and a long way from emerging from it. That means the inevitable interference of the government via quantitative easing, where they waste money by attempting to throw it at the problem again, even after close to $2 trillion has already been pumped into it.
That means the continuing debasing of the U.S. dollar and the resultant increase in gold prices.
Gold for the month of September rose over five percent as it broke records in eleven of the last thirteen trading days.
Another major factor in gold price support is interest rates, and along with the Federal Reserve, the Bank of Japan and Bank of England have signaled they're unlikely to make any major moves to increase them any time soon.
The sovereign debt crisis in Europe, which has been trying to be hidden by the media, or taken at face value from the mouths of politicians that things aren't as bad as they seem, is in reality again being seen as a disaster, as this time Ireland battles to manage its huge debt load.
These and other important elements continue to provide healthy soil for gold to grow in.
Other than raising interest rates, there's nothing that can be done to change these circumstances in the short term, and that guarantees gold prices are far from ending their bull run.