GOLD STOCKS NEWS - Gold stocks tumbled alongside the gold price Tuesday, with the Market Vectors Gold Miners ETF (GDX) falling $1.94, or 4.0%, to $46.96 per share in mid-day trading. With today’s weakness in gold stocks, the GDX is now lower by 9.6% in July and is on pace for its worst monthly decline since its 14.4% slide in June 2009.
Gold stocks have continued to underperform the gold price in 2010, evidenced by the 1.6% year-to-date gain in the GDX, versus a 6.2% rise in the price of gold. The shares of many of the world’s largest gold mining companies - which comprise the large majority of the GDX - have continued to disappoint investors in recent years. However, with several of the largest gold stocks set to report their latest earnings results this week, there are several reasons for optimism.
The spot gold price posted its highest-ever quarterly average of $1,196 per ounce from April 1 - June 30 of this year, which should contribute to substantially higher margins and cash flow numbers for gold producers. Furthermore, the price of oil, one of the main input costs for mining operations, dropped from $84.53 to $75.59 from March 31 to June 30. As such, investors in gold stocks are eagerly awaiting to see if these factors translated into improved performance for the sector.
Newmont Mining (NEM), the largest U.S.-based gold producer and the only gold stock included in the S&P 500 index, is set to release earnings after the market close on Wednesday. Scotia Capital is expecting Newmont to report earnings per share (EPS) of $0.82, equity production of 1.3 million gold ounces, and cash costs of $509 per ounce on an equity basis. National Bank Financial (NBF) is forecasting EPS of $0.86, production of 1.2 million ounces, and equity cash costs at $515 per ounce. Both firms rate shares of NEM a “Sector Perform,” with one-year price targets of $74 and $66 for Scotia and NBF, respectively. In mid-day trading shares of NEM plummeted $3.03, or 5.2%, to $55.07.
Agnico-Eagle Mines (AEM), one of the largest Canadian-based gold stocks, is also scheduled to report Wednesday after the close. Scotia, which has a $73 one-year price target and rates AEM “Sector Perform,” is looking for EPS of $0.41 and gold production of 231,000 ounces at total cash costs of $470 per ounce. NBF has a $77 one-year price target and an “Outperform” rating on shares of AEM and is forecasting EPS of $0.42 and gold production of 245,000 ounces at total cash costs, net of buy-product credits, of $416 per ounce. Shares of Agnico-Eagle Mines tumbled alongside other gold stocks Tuesday, dropping $2.03, or 3.6%, to $54.40 in mid-day trading.
