Expect higher cash costs when gold giants, Goldcorp Inc. (GG) and Barrick Gold Corp.(ABX), report second quarter earnings on Thursday, says Credit Suisse analyst Anita Soni.
For Goldcorp, Ms. Soni predicts cash costs of $287 per ounce in Q2 versus Goldcorp's guidance from January of $275 per ounce in the quarter.
In a note to clients, she said:
The cash costs forecast reflects the lower-than-expected grades mined resulting in lower copper production (-5mlbs) from Alumbrera, as well as inflation, oil price rise and slightly lower than plan production.
Ms. Soni estimates Goldcorp's earning per share at $0.21 versus consensus estimates of $0.22 due to lower gold prices in the quarter and production at 595 thousand ounces of gold below guidance of 615 thousand ounces.
For Barrick, rising oil prices are the main culprit behind the company's rising cash costs, estimated to hit $415 per ounce in the quarter compared to $393 in the first quarter.
She wrote:
While Barrick has hedged 65% of its remaining 2008 diesel consumption (we estimate at $78/barrels of crude), the 24% rise in average oil price is expected to impact Barrick's cash costs by $4 per ounce for $10 per barrel above $90 per barrel or $18 per ounce.
Ms. Soni added that cash costs are also being negatively affected by pit wall stability issues at the Super Pit, ore sequencing at Round Mountain and a shutdown in early Q2 at Turquoise Ridge.
She is forecasting second quarter EPS at Barrick of $0.54 versus the Street's $0.57, as the 3% decline in gold prices quarter-over-quarter is offset by the 9% copper price increase over the same period.
