GOLD STOCKS NEWS – Gold stocks slid Thursday as the Market Vectors Gold Miners ETF (GDX) dropped $0.63, or 1.1%, to $57.85 per share. Weakness in gold stocks and the GDX was fueled by a 2.0% decline in shares of Barrick Gold (ABX), the largest component of the gold stocks ETF. Barrick, the world’s largest gold mining company, announced second quarter financial and operating results from a three-month period that saw gold bullion average $1,513 per ounce.
Barrick Gold reported that net earnings rose 35% year-over-year to $1.16 per share, ahead of the $1.09 consensus estimate among Wall Street analysts. Second quarter EBITDA, a proxy for cash flow, climbed 40% to $2.1 billion from $1.5 billion in the prior year period.
Gold production came in at 1.98 million ounces at total cash costs of $445 per ounce. Barrick noted that it is on track to meet its 2011 operating guidance of 7.6-8.0 million ounces at total cash costs of $450-$480 per ounce. Shares of ABX slid $0.99, or 2.0%, to $47.55 this morning.
J.P. Morgan analyst John Bridges commented that “Barrick reported solid operating results but has reported capex hikes…We expect the stock to be under pressure today as the market adds the higher capital bills to ABX valuation.” However, Bridges maintained his Overweight rating on ABX.
Barrick Gold noted that with regard to the gold stocks as a whole, “The mining industry is facing global cost trends which reflect a substantially higher commodity price environment, stronger local currencies, tighter labor markets and higher inflation in some regions compared to several years ago when many projects were at the feasibility stage. For Barrick, stronger metal prices have significantly improved project economics and overall rates of return despite higher estimated capital costs.”
Aaron Regent, Barrick Gold’s President and CEO, stated that “Operationally and financially, Barrick had a solid quarter, meeting our operating and cash cost targets which resulted in significant margin expansion and record financial results. We also completed the acquisition and long term financing of Equinox which adds two attractive assets to our portfolio and another source of long term cash flow.”
Other gold stocks in the news Thursday included Goldcorp (GG) and Newmont Mining (NEM), the second and third largest components of the GDX. Goldcorp reported that earnings, excluding one-time items, nearly doubled to $0.52 per share from $0.27 per share in the second quarter of 2010. However, the Company lowered its 2011 production forecast to 2.5-2.55 million ounces from 2.65-2.75 million, due to operational issues at its Peñasquito Mine in Mexico and Musselwhite Mine in Canada. In morning trading, GG tumbled $2.15, or 4.2%, to $48.75 per share.
Newmont Mining, the only member of the gold stocks sector included in the S&P 500 Index, raised its regular quarterly dividend by 50%, from $0.20 to $0.30 per share. Earlier this year, the U.S.-based gold miner switched to a gold price-linked dividend policy to allow shareholders to benefit further from the rising price of the yellow metal. Shares of NEM bucked the trend of lower gold stocks on Thursday, climbing $0.28, or 0.5%, to $57.60 this morning.
Other notable gold stocks moving lower included GDX components Agnico-Eagle Mines (AEM) and AngloGold Ashanti (AU). AEM and AU fell 2.0% and 1.2%, respectively.
Spanish Mountain Gold Reports Additional High Grade Results
The final 40% of results are expected to be available within eight weeks. The results of the drilling conducted to date continue to confirm the continuity of potentially economic mineralization in areas presently classified as inferred resources. Full Spanish Mountain Gold News Release.
- 321.5 meters grading 0.65 g/t gold including 50m grading 1.03g/t gold - including 14.27m grading 2.12g/t gold in hole 11-DDH-961 at the Main Zone.
- 284.50m grading 0.50 g/t gold including 66.5m grading 1.35g/t gold in hole 11-DDH-951 at the Main Zone.
- 123.00m grading 0.91g/t gold in hole 11-DDH-950 at the North Zone.
