The story of equities for now is going to continue to be guidance, as quarterly reports like the solid one turned in by Newmont Mining (NYSE:NEM) are no longer driving investor interest. The rearview mirror is no longer being used as a guide by investors.
Newmont Mining Corp., citing sharply higher copper and gold prices, reported Thursday a 46% jump in its fourth-quarter profit, topping Wall Street’s expectations.
But the world’s second-largest gold producer also lowered again its 2011 production forecast and warned of rising costs, which took the shine off its latest results and sent its shares tumbling nearly 4% to $56.82 at the open.
Denver-based Newmont (NEM) said its fourth-quarter net income attributable to stockholders rose to $812 million, or $1.61 a share, from $558 million, or $1.13 a share, in the year-ago period.
Adjusted to exclude one-time items, the company’s quarterly earnings rose to $574 million, or $1.16 a share, from $561 million, or $1.14 a share.
The per-share results topped the $1.14 analysts surveyed by FactSet Research had been looking for.
Consolidation in the gold mining sector is sure to pick up as production estimates continue to be lowered and organic growth not able to keep up with demand.
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Northgate Minerals Corp. (AMEX:NGX) (TSE:NGX) said they've received approval from regulators to start development on the Young-Davidson gold mine in northern Ontario.
Construction is scheduled to being in the early part of August, with the main process building being the first structure to go up.
Reserve at the mining project are estimated to be about 2.8 million ounces, although additional drilling this year should result in those numbers being bumped up.
As of now, the gold production over the 15 year life expectancy of the mine is expected to be an average of 180,000 ounces, at a cash cost of $350 an ounce during that time.
Gold mining giants Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) (TSE:ABX) are strong companies but cheap stocks at this time.
The overall gold mining sector is cheap at this time, as they're making real profits and are largely undervalued and lagging the price of gold.
For example, with Barrick and Newmont, they're both trading far below what they were just six months ago, with Barrick trading at just below 19 times earnings, down from 26.6 times earnings in December, while Newmont is trading at 16.4 times earnings, dropping from the 26.7 time earnings they were trading for in December as well.
Hecla Mining Company (NYSE:HL) announced their Board of Directors has declared a regular quarterly dividend for their Series B Cumulative Convertible Preferred Stock.
For each share of those shares, the owner will receive $0.875, equivalent to about $138,000.
Shareholders of record as of June 15, 2010 will be paid on July 1, 2010.
Total shares outstanding of Preferred B Stock is 157,816.
Also declared was the regularly quarterly dividend on the outstanding 6.5 percent Mandatory Convertible Preferred Stock. That amount will be $1.625 a share, which the dividend will be paid in common stock of Hecla. That comes to about $3.27 million, in addition to cash for fractional shares.
Hecla has a 52-week range of $2.26 - $7.47 a share, and recently plunged, as did most mining stocks, with the correction in gold and metals emerging last week.
Golden Star Resources (AMEX:GSS) had a big day today, along with other gold miners and gold futures as well, ending the session up 4.2 percent, or 17 cents, closing at $4.22.
Volume was down from the 3-month average of 3,488,360, with 2,437,232 share changing hands.
Many of the gold miners acted this way today, and it's probably from the exit of traders and speculators from the market, and investors moving back in to grab up some bargains.
Last week they took their profits or sold their gold to cover losses in other markets, which brought down the price of gold and gold miners significantly, as most of you know.
That should change this week, but there are so many economic variables again out there, we'll have to wait and see. Overall though, I anticipate better upward movement in gold prices and gold mining stocks this week.
It was interesting watching gold mining companies like Eldorado Gold
(NYSE:EGO) (TSE:ELD), Yamana Gold (NYSE:AUY) and AngloGold Ashanti (NYSE: AU) rose uniformly with the price of gold today, and they weren't the only gold miners doing that.
I checked out about 15 gold miners, and everyone of them moved in sync with gold prices throughout the day.
It went like this. First there was a huge increase in the price of gold, rising to record levels again, reaching just below $1,250 an ounce. Then right before noon there was a quick downward plunge, and not too long after noon, gold prices started upwards again.
Go and look at the charts of the companies listed above, and a number of others like NovaGold Resources (AMEX:NG), Apollo Gold (AMEX:AGT) Iamgold (NYSE:IAG), Barrick (NYSE:ABX) and Newmont (NYSE:NEM), and you'll see the same behavior. Pretty interesting.
That brings me to the conclusion that gold miners in general are starting to finally move in step with gold, and that gold prices have now seemingly taken them under their wing so to speak, and are driving the gold miners along with it.
A lot of gold mining investors have been waiting for this to happen on this large scale, and now it seems to be locked it; at least for a period of time.
Obviously fundamentals will be significant in the long term, but for now, it seems like this is going to be the trend, albeit one that could change just as quickly as it began.
Two things are driving this now, the fears over the repercussions of China dealing with their inflation problems, and the European debt crisis which will drag on for many years, and of which there is no way of knowing where it will all go or end.
A growing number of analysts and economists believe this is the end of the euro, as Europe didn't have the will to defend it and not bail out their socialist, welfare neighbors.
To the contrary, they're encouraging the behavior by bailing them out, although in reality they're directly bailing out the banks which hold the debt or bonds which have provided the good life for the socialist, who continue spending and consuming, using other people's money.
For gold investors this is good news, as there is absolutely no short-term fix for this, and no matter how much money is ended up thrown at it, it won't solve the problem, only extend it down the road, and how far down the road will only be determined by how many trillions they end up throwing at it.
So maybe the socialists will get there way (for a very short time), but sooner or later the bill will come due, and if this goes like I think it will, with the Federal Reserve, central banks and governments around the world still drunk with spending from the bailout of banks and businesses around the globe, we'll probably see the most extraordinary and outrageous behavior from these people that will be unprecedented in history as to its scope, and gold and well-run gold mining companies should continue to flourish as this plays out over the years.
AngloGold Ashanti rose by $0.19, Yamana Gold increased $0.13 and Eldorado Gold was up $0.25, all in New York.
The largest tin miner in Peru, Minsur (MINi.LM), announced it will start producing gold in 2010 at its Pucamarca mine.
Expectations are gold production will start sometime in the last quarter of 2010.
Projections are the mine should produce about 70,000 ounces of gold on an annual basis.
Minsur also operates one of the largest tin mines in the world, San Rafael.
Harmony Gold Closes Three Shafts at Virginia Project
Harmony Gold Mining (NYSE:HMY) is closing down three of its shafts at the Virginia project in South Africa, affecting close to 3,700 workers.
The particular shafts being shut down have been mined for about 60 years, and according to CEO Graham Briggs, have "reached the end of their lives.”
About 10 percent of those working at Harmony Gold were part of the Virginia operations, and they will either be offered transfer, early retirement or retraining.
Costs for extracting gold has increased at the shafts while the amount of gold is shrinking, as they had to go deeper in to get the gold, raising the costs of doing business.
NovaGold Resources Strong Future
Although the current resources of NovaGold (AMEX:NG) haven't been inspiring to investors, those they hold with future potential definitely are, which is why hedge fund investors John Paulson and George Soros made significant investments in the company.
Total investment from the two hedge funds totaled $175 million, and that doesn't include other investors with interests in the gold miner.
Investors with a long term outlook know the extraordinary value in Novagold, as evidenced primarily from their Donlin Creek and Galore Creek projects, which are considered among the largest of any gold projects in the pending development stage in the world.
Novagold is another undervalued gold mining company with not only the two project mentioned above as part of their future, but others as well.
The company has also made quality partnerships with companies like Barrick Gold (NYSE:ABX) and Teck Resources (TSE:TCK-B), along with the financing deals, showing they have a great plan in place and are getting the right partners and financing to go forward with confidence and success.
Barrick Gold
Barrick Gold (TSE:APX) is asking the U.S. District Court to hear oral arguments concerning being allowed to continue mining at the Cortez Hill project while awaiting the reviews of the U.S. Bureau of Land Management on potential environmental impact of mining in the area.
The 9th Circuit Court of Appeals ordered more analysis of the effects on the environment, and shut down the mining operations at the time.
Barrick Cortez, a subsidiary of Barrick Gold, is asking for permission to mine on a limited basis while awaiting the outcome.
Barrick Gold
Gammon Gold in for a couple of tough years
When you consider we're in one of the most significant bull markets in history, the performance of Gammon Gold (NYSE: GRS), say, over the last five years, reveals an enormous amount of weaknesses in the company, and none of them bode well for them going forward.
The primary short-term problem has been the results of its drilling, which caused estimated gold reserves to plunge by 18 percent last year. That seems to be the primary reason TD Newcrest analyst Steven Green slashed his 12-month target on the share price to $7. He originally had it at $9. As of this writing shares are at $7.19.
Gold mining isn't rocket science as far as understanding it goes. You find gold in the ground and extract it for less than you can sell it for; the end result is profits or losses, like any other business.
The decline in reserves came from the disappointing results at the Ocampo mine in Mexico where drilling over a range of over 115 meters left reserves less than before they started.
Another problem is the reserves they do had has been upwardly revised as to the costs to extract the gold, bringing production guidance down 24 percent in 2010 and 18 percent in 2011.
It's going to be a tough couple of years for Gammon Gold, and other than better cost management, there doesn't seem to be much they can do about it to turn it around.
One thing the company asserts it's going to do is increase production going forward. They'll have to do more than say that though, and come through on the promise.
AngloGold Ashanti Storage Unit at Iduapriem Mine
AngloGold Ashanti (NYSE:AU) said yesterday it will resume production at its Iduapriem Mine in Ghana sometime in April.
After some possible negative effects from tailings from a storage unit, the gold miner suspended operations at the mine once a temporary storage unit is built.
AngloGold received permission from the Environmental Protection Agency of Ghana to build the temporary storage until they could get a permanent one in place, which should be completed by the early part of 2011.
Queensland Mining Corporation Estimate Flamingo copper-gold
Queensland Mining Corporation (ASE:QMN) announced its estimate of the Flamingo copper-gold resource project. Shares in the company rose as identification of mineralization of a 300 meter long area reinforced company assertions in the past.
All resources have been classified as Inferred Resources at the site, and the estimate has been reported in compliance with the 2004 edition of the JORC Code.
Drilling by Xstrata (formerly Mount Isa Mines) in 1994, along with data garnered from drilling by QMC in 2009 was the basis of the resource estimate.
The drilling program to define the resources at the Flamingo copper-gold will start on April 7. The drilling will be 2,500 meters and will commence to find out the size of the resource and to expand the search of the overall area in the project targeted.
South Africa Gold Production
Even though South Africa has been the leading producer of gold for most of the 20th century, in the 21st century they aren't faring as well, as they've dropped to the No. 4 position globally.
In 2009 gold production in the country fell to under 205 tons for the year. Aging gold mines are the principle culprit in the reduced South African gold production.
To give an idea how quickly this is happening, in 2008 the production levels were down by 14.5 percent, while in 2009 it fell a further 5.8 percent.
There's only one factor going on here, and that is that the country is simply starting to run out of the metal with no new, significant gold mines waiting in the wings.
The top three gold producing countries in the world are led by China, and then the United States and Australia.
What could be good news is this could increase the price of gold which isn't expected to diminish in demand for some time.
South Africa Gold Production
Goldcorp's Return to Shareholders
Goldcorp (NYSE:GG) should be a strong performer for many years into the future, and the ongoing returns of over 20 percent for the last 15 years should continue on in the current economic climate.
With gold production costs of around $350 an ounce, and gold almost guaranteed to be over $1,000 an ounce for a long time into the future, Goldcorp should continue to make shareholders in the company happy for years ahead.
Goldcorp's Return to Shareholders
With the price of gold assured to go up in 2009, many investors are giving a close look at gold mining companies as a significant part of their investment portfolio. To that end, Yamana Gold is being reconsidered again for 2009, after disappointing investors in 2008.
Many thought Yamana Gold was the darkhorse of the sector, and had tremendous upside potential in 2008. Conseqently it plunged in value to under $4 a share, as gold was under pressure from forced liquidation and copper prices plunged as well.
That's probably the chief challenge in 2009 for the company, as they look at cutting their exposure to copper resources to 19 percent, down from the 36 percent of the company exposure to copper in 2008.
As far as its commercial gold equivalent ounce goes, Yamana Gold is looking to increase by 36 percent to 1.35 M oz GEO in 2009. A number of investors believe this year could be a solid one for the precious metals company, looking for prices to almost double for the year. That could definitely happen for the gold company, considering the real possibility that gold prices could rocket up this year.
Yamana Gold stock should move along with that gold price increase, assuming managing their exposure to copper is successfully implemented.
Another key factor for all mining companies has been the lowering of operational costs as energy prices have fallen to levels not seen for some time. If those costs continue to stay down, it could help all mining companies, including Yamana.
One thing that will bear watching will be the commissioning risk the company is exposed to at its mining site in Gualcamayo in Argentina, along with its Sao Vincente mining site in Brazil. Silver production and prices will also be a major contributor to the success of the company in 2009. If gold prices go tremendously high, it could not only bring up the price of silver with it, but override it altogether through its successful surge, whether silver performs well or not.
I expect that silver prices could by percentage even outperform gold in 2009, and so will rather be a positive impact on the company rather than a negative. Hopefully they'll produce enough to make a big difference.
With a number of the long-term pipelines shut down or scaled back, the acquisition by AngloGold Ashanti of a 33.33 percent stake in the Boddington Mine joint venture could put pressure on Yamana and other gold mining companies to go into consolidation mode to shore up the losses connected to their gold pipeline reductions.
Gold stocks overall should be up for 2009, and Yamana Gold will participate successfully in the upwards move.
Again, as operational costs for gold mining companies decrease while the price of gold increases, this should be one of the better years for the gold industry in some time. Gold investors should enjoy a lot of positive perks and success too.
So with gold and metals extraction costs declining, and gold companies pretty much operating at lean levels, 2009 will be a banner year for the quality gold companies.
Yamana Gold is positioned to take full advantage of theis climate, and lessoning their exposure to copper while keeping operating costs low, should lead them to a great year.
Many people thought last year was going to be a breakout year for Yamana, but forces like forced liquidation and deleveraging kept them - like most gold mining companies and gold futures - from advancing in the way they should have.
This year is much more predictable as forced liquidation seems to be unwound to a large degree in a way that hedge funds should increase investment in gold and gold-related companies and products as gold futures once again become the place of safety investors looking for a financial haven expect.
What was expected by many of Yamana Gold in 2008, should be experienced by gold investors in 2009.
The term rally and bullish should continue for gold and gold futures over the next year or so, as it shouldn't have any problem breaking above the $900 an ounce barrier and soaring from there. Gold and silver mining producers or companies will also do great this year, not only from demand, but operations will cost much less as energy costs, which are a key cost for gold mining companies, will remain down this year, while gold prices continue to rise. That should produce a banner year for gold mining companies.
Much of what has held gold prices down during these tough economic times has been the forced liquidation and deleveraging major funds had to do in order to raise cash to cover their debt and expenses. That forced them to sell their positions in gold and other commodities in order to do that. That's the reason commodities struggled for some time, especially some of the precious metals. It's also the reason the US dollar was inflated far beyond its underlying fundamentals.
Now that it looks like gold is back as the haven of safety it always has been, we'll start to see it grow in a much larger way and respond as it should have been all along. The bulls are out of the pen and we'll see the yellow metal soar in 2009.
Many financial experts are turning into bulls now, as the reason they were so unsure is no one know how long big funds and investment firms would take to unwind their positions and be ready to go back to the commodity markets. It seems we have the answer now, and that answer is a bull market.
This of course means that quality gold companies will enjoy good times going forward, as they lead commodities and other precious metals forward. I don't think the grain markets will participate in the bull market, but most many metals will, including silver, which according to percentages could even outperform gold.
Another reason gold will do well for some time is the terrible ideas of the government to bailout every industry that runs their companies poorly. That will force them to keep printing money into oblivion, and that fiat money has a bad ring to it, as it'll definitely push inflation much higher because there's no one to buy U.S. debt to pay for these extraordinarly expensive initiatives.
That's good news for gold investors, as inflation will be another arrow in the quiver that will keep gold prices rising, and the gold rally extending.
Foreign governments will ease out of the untrustworthy U.S Treasury bonds, and so that will leave the U.S. and Federal Reserve with no option to keep the money printing presses humming, and they will.
That will also bring the value of the U.S. dollar down, and will make gold even more attractive.
Similar to the forced liquidation period of funds and investment firms, it'll be impossible to know how long the bull gold rally will last, but I think it'll be much longer than the forced liquidation period that helped the dollar remain strong, although the fundamentals were so off.
In this case, the trillions being promised and spent by the US government could keep gold as a solid investment for quite some time, as the U.S. dollar continues on its road to collapse.
As far as gold and silver mining companies, we'll see quite a number of them enjoy some of the best years they ever have, assuming they're already well run companies and positioned to take advantage of the haven of safety investors will be looking for in 2009.
DRDGOLD, the fourth largest gold producer in South Africa announced it is cutting 1,335 jobs at it shut down a mine east of Johannesburg.
The workers losing their jobs are part of a contingent that labored at the ERPM mine that closed in October for maintanence related to underground water problems. The ERPM mine had to be shut down underground as the pumps used to handle the underwater situation could get rid of the rising water levels fast enough, making it impossible for mine workers to continue.
According to DRDGOLD, they've transferred some remaing workers to other operations, while other accepted volunatary retrenchment.
The gold company added there was no way they could continue gold mining operations, as it is beyond the financial means of the company to retain full time workers at an operational level.
Gold mining in South Africa is the major export for the country, being 9 percent of overall export earnings for the South African economy.
DRDGOLD and the overall South African gold mining industry continues to be under pressure, as more job cuts will come until operations are improved.
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