GOLD STOCKS NEWS – Gold stocks declined Tuesday morning as the Market Vectors Gold Miners ETF (GDX) slid $0.69, or 1.3%, to $53.32 share. Weakness in gold stocks and the GDX was fueled by modest declines in COMEX gold futures and the broader equity markets. The yellow metal dropped 0.6% to $1,668.10 per ounce while the S&P 500 Index dipped 0.4% to 1,311.18. Gold stocks in Canada retreated alongside the GDX, as the S&P/TSX Global Gold Index was lower by 0.9% at 365.96.
Gold stocks in the news thus far this week included Kinross Gold (K.TSX, NYSE: KGC), whose price target was lowered yesterday to C$14.50 from C$16.50 per share by Macquarie analyst Tony Lesiak. The firm cited Kinross’ decision to delay development of its Tasiast gold project in Mauritania due to further cost increases as a key reason for the target price reduction. “We continue to believe Kinross will have difficulty outperforming its peers until further clarity on its growth pipeline is provided,” Lesiak added.
Despite Macquarie’s cautious commentary, the firm maintained its Neutral rating on Kinross Gold. In Tuesday morning trading, shares of K.TSX fell 1.1% to C$10.63 per share.
Barrick Gold (ABX) was also the target of negative analyst commentary this week, as RBC Capital Markets downgraded the world’s largest gold miner to Sector Perform from Outperform and lowered its price target to $62.00 from $70.00 per share. On Tuesday, ABX dropped 2.5% to $45.80 per share.
RBC Analyst Stephen Walker lowered his 2012 production outlook to 7.5 million ounces of gold from 7.8 million and raised his cash costs estimate to $550 from $516 per ounce. “We believe there remains potential for further capital escalation and/or start-up delays at Pueblo Viejo (expected to come online in mid-2012), Jabal Sayid (expected to come online in H2/2012), and Pascua Lama (expected to come online in mid-2013),” Walker contended.
While the tone of Walker’s report was clearly negative, he did note that Barrick is likely to still generate substantial free cash flow during the next several years. He estimated that the Company could increase its dividend payout ratio to 20-30% from its present 12% level. Such a measure could lift Barrick’s dividend yield from 1.3% to between 2% and 3%.
Other notable gold stocks moving lower this morning included GDX components Agnico-Eagle Mines (AEM), Goldcorp (GG), and Newmont Mining (NEM). AEM fell by 1.3% to $35.02, GG by 0.8% to $45.00, and NEM by 1.4% to $58.42 per share.
Canaco Launches “Most Ambitious” Growth Program in Company History
Canaco also announced plans for exploration and development activities in 2012 at Handeni. The focus of the plans is to advance Magambazi toward development, with completion of an initial resource estimate by the end of the first quarter 2012 and a preliminary economic assessment (PEA) by the end of the third quarter 2012. Full Canaco Press Release.
* Six diamond rigs are completing the last stages of delineation drilling, which is expected to be complete by the end of January ahead of the initial resource in late Q1/12
* The infill program is expected to include approximately 400 holes totaling up to 110,000m of drilling
