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Update: Goldcorp Strikes A Deal To Buy Probe Mines
- Goldcorp acquires Probe Mines and its Borden Gold project for around $440 million in an all-stock deal.
- The 49% premium paid was significant, and may be an example for future acquisitions in the gold space.
- The deal allows Goldcorp to improve Borden Gold's economics by processing ore at its nearby Porcupine operations.
- This acquisition confirms our Goldcorp acquisition expectations, and we now think the company is done with its near-term acquisitions, but other companies may be on the prowl.
Update: Alamos Gold Receives Government Injunction On Agi Dagi
- The company received a government injunction on its Turkish Agi Dagi project that will require further work before the EIA is approved.
- This is not unprecedented as it is the same thing that happened to the company's larger Kirazli project.
- It is a slight negative for the company and we think it may be prudent for investors to hold or take profits until a government decision on Kirazli is rendered.
Eldorado Gold: Has Political Risks Finally Caught Up With The Company?
- Eldorado has done a great job keeping production costs low while managing operations across 3 continents in some riskier jurisdictions.
- Upcoming Greek elections pose a major risk to the company as around 30% of gold reserves and resources are located in Greece.
- We believe it would be prudent for investors to reduce expectations as we expect the company to underperform by anywhere from 8-15% due to Greek risk.
The Swiss National Bank's Move And What It Means For Gold Investors
- The SNB decided to drop its currency peg in a sudden move that shocked markets.
- We think this means that an ECB QE program is imminent as the ECB meets next week.
- The implications for gold are mixed, but three out of four outcomes of the ECB meeting we think are positive for gold.
A 2014 Gold Investors Year In Review: Cracks In The International Order Appear
- We think 2014 will be remembered for major events that are breaking down the current international order.
- US and Russian relations hit their lowest point since the Cold War and there is no sign of improvement.
- In the Middle East, ISIS threatens the status quo even as oil plummets and savages oil-producer revenues.
- Populist groups in Europe are emerging, with the most notable event being the upcoming Greek elections that could break up the European Union.
- Despite gold not doing much in terms of price in 2014, investors will want to own gold in 2015 if we see further turmoil.
Update: Argonaut's 4th Quarter Production Totals Rise
- Argonaut's fourth quarter saw record production of 44,312 gold-equivalent ounces.
- Management's outlook for 2015 is 135,000-145,000 gold-equivalent ounces, which is slightly higher than 2014 production.
- Results are mixed as grades fell sequentially and investors need to pay close attention to what management expects in terms of grades over 2015.
What It Really Costs To Mine Gold: The Argonaut Gold Third Quarter Edition
- The company's core and core non-tax costs both fell on a sequential basis and were around the company's average costs for 2014.
- Despite this much of this rise was due to record rainfall in Mexico during the quarter.
- We think that the company could surprise with much better earnings in the fourth quarter as costs can drop due to normal rainfall and lower oil prices.
5 Of Our Favorite Gold And Silver Stocks For 2015
- Randgold meets the "best in class" standards with low costs, a clean balance sheet, and future gold growth which makes it one of our top picks.
- Tahoe Resources is one of the few silver producers prodcing silver at a profit at sub-$20 silver and is clearly an industry leader in terms of profit margins.
- Timmins Gold has a relatively clean balance sheet and has the possibility to re-rate much higher as invesotrs digest their Caballo Blanco acquistion.
- Exeter Resources owns one of the largest gold deposits in the world and offers acquirers a cheap target in an already popular mining district.
- Bear Creek Mining is another "best in class" developer that owns one of the largest silver deposits in the world that is practical at today's silver price.
Complete Third-Quarter Gold All-In Costs Show That Gold Investors Should Be Very Comfortable With Their Investment
- Our analysis of gold costs includes more than 25% of total world gold production and thus we're confident it can be extrapolated very accurately.
- Gold miners on a core cost basis are producing gold at a higher cost than the previous two quarters due to an increase in taxes.
- Gold miners on a core non-tax cost basis saw their costs drop sequentially, but are relatively flat on the year.
- Despite heavy cost cutting, most gold is produced at prices higher than the current gold price, and that is bullish for the gold price.
It Seems Like Hedge Funds Are Jumping Into The Gold Market
- The popular narrative is that the gold market is currently quiet and dead and there is very little investor interest.
- That is not supported by the large amounts of volume that we're seeing in the gold mining and leveraged gold mining ETFs.
- The volume has increased to the largest levels in history and it seems to be hedge funds who are getting into the market.
- Since most of the interest seems to be on the short side this may provide a good opportunity for patient gold mining investors.
Update: Timmins Gold Acquires Caballo Blanco Gold Project
- Timmins Gold announced the acquisition of the Caballo Blanco Gold project for $10 million in cash and 16 million in shares.
- This confirms our belief that the company expects to have a much better fourth quarter in terms of costs and cash flow.
- We also believe this acquisition will help re-rate the company's shares to higher levels as it is expected to increase production by 90,000 ounces per year.
- This is the second acquisition in the sector this week and the previous acquirer (Coeur Mining) rose the day afterwards based on broker upgrades which is positive for Timmins.
What It Really Costs To Mine Gold: The SilverCrest Mines Third-Quarter Edition
- The company's costs on a core and core non-tax basis continued to rise in the third quarter.
- This shouldn't be a surprise as the company is continuing its transition from open pit operations to underground mining and milling.
- Investors should pay particular attention to Santa Elena's capitalized costs in the fourth quarter report as any reduction will significantly lower SilverCrest's costs.
What It Really Costs To Mine Gold: The Timmins Gold Third Quarter Edition
- The company's core and core non-tax costs rose during the third quarter to the highest levels of 2014.
- Much of this rise was due to record rainfall in Mexico during the quarter which lowered production.
- Management expects cash costs to fall in the fourth quarter and we believe that investors can expect core costs to fall as well.
Is This The Reason European Central Banks Repatriating Their Gold?
- The Austrian central bank is the latest central bank to bring up repatriating gold reserves from abroad.
- Gold repatriations by European central banks suggest that maybe there are more problems with the Euro than investors think.
- The European political climate is a mess as populist and anti-Euro parties gain popularity and establishment politician poll numbers plummet.
- We are starting to see gold performing very well in Euro terms with gold nearing its highest levels of the year in Euros.
- If we are right we may start to see European central banks increase gold reserves.
What It Really Costs To Mine Gold: The Richmont Gold Third Quarter Edition
- Richmont's core and core non-tax costs both rose on a sequential basis, but they are still in the top half of gold producers.
- Most of the rise in costs per ounce were the result of lower production totals as total nominal costs actually fell in the quarter.
- Recent quarter's low cost totals have taken Richmont from one of the highest-cost producers to one of the lower-cost producers.
- The key moving forward will be the development of the company's high-grade Island Gold Deep deposit and investors should monitor the development closely.
What It Really Costs To Mine Gold: The Iamgold Gold Third-Quarter Edition
- Iamgold's core and core non-tax costs for the quarter were the highest in 2014 and were a disappointment for investors.
- Rising costs were attributed to a large increase in quarterly taxes and higher operational costs.
- The sale of the company's Niobium operations should be watched by investors to see what management chooses to do with the new cash hoard.
- Investors should also keep an eye on the ramp-up of Westwood operations, as that will be a key determinant of future costs.
Our Favorite Gold And Silver Potential Takeover Candidates: Meet This Peruvian Bear
- Bear Creek Mining's Corani deposit is one of the largest undeveloped silver deposits in the world.
- Corani is an advanced stage deposit that would almost double most major miners' silver reserves overnight and would cost a little over $100 million.
- Pan American Silver is the most logical acquirer as it could double its reserves with an acquisition and already has operations in Peru.
- We think acquirers will wait until the Peruvian government concludes its ruling on the company's Santa Ana deposit.
What It Really Costs To Mine Gold: The Alamos Gold Third Quarter Edition
- Alamos Gold saw its core and core non-tax costs jump in the third quarter to the highest levels of 2014.
- Some of it was due to the extraordinary rainfall seen in Mexico that diluted the gold recovery solution, but this shouldn't sugar-coat a poor quarter.
- Alamos Gold's value lies in what it will do next and that is where investors should pay particular attention.
What It Really Costs To Mine Gold: The Kinross Gold Third Quarter Edition
- The company's core costs were up in the quarter to the highest levels in FY2014, mostly due to a big increase in quarterly taxes.
- The company's core non-tax costs were lower on a sequential level and suggest that production costs were fairly stable.
- After the quarter ended, the company was able to sell its Fruta Del Norte property which will help give the company some financial flexibility.
What It Really Costs To Mine Gold: The Goldfields Third-Quarter Edition
- Goldfields continues to lower its core and core non-tax costs to the lowest levels of FY2014.
- The company also is working hard to lower its debt load, and reduced it by $137 million in the quarter.
- Goldfields continues to climb into the ranks of the mid-tier gold producers.
What It Really Costs To Mine Gold: The Allied Nevada Gold Q3 Edition
- Allied Nevada's costs on both a core and a core non-tax basis have continued to rise on a year-over-year basis.
- This isn't unexpected, as the company predicted this in the second quarter as stripping ratios rise.
- The company needs a significantly higher gold price at the current cost structure.
Investors Take Note: The Swiss Gold Referendum Has Already Changed The Gold Market
- The upcoming Swiss Referendum has already changed the gold market as it has put gold in the public domain for citizens and politicians.
- Recent events by central banks across the world are suggesting a new view on gold and the desire for repatriation.
- If the psychology of the gold market has changed to demand repatriation then there may be a large rise in the price of gold.
What It Really Costs To Mine Gold: The Randgold Third Quarter Edition
- Randgold’s costs on both a core and a core non-tax basis have continued to fall on a year-over-year and sequential basis.
- This decrease in costs is primarily due to the company's ramp-up at its world-class Kibali mine in Congo.
- Investors need to carefully monitor the decision of the Congolese government concerning new mining taxes as it will cut into the company's profitability.
- Randgold remains one of the few gold miners with costs low enough to survive at $1200 gold and offers investors a quality low-cost producer with growth potential.
What It Really Costs To Mine Gold: The Eldorado Gold 3rd Quarter Edition
- On a core cost basis, Eldorado's third quarter costs rose on a sequential and year-over-year basis but still remain one of the lowest in the industry.
- Core non-tax costs remained in-line with previous quarters and keep the company's costs before taxes under $1000 per ounce.
- Eldorado remains one of the fewest miners profitable at current prices.
What It Really Costs To Mine Gold: The Yamana Gold Third Quarter Edition
- Yamana's core costs rose significantly in the quarter, but most of it was due to a huge write-down and extraordinary taxes experienced in the quarter.
- To get a better idea of the company's costs we need to analyze core non-tax costs, which Yamana did an excellent job with in the third quarter.
- Most of the profitability of the company did not show in the quarter because it didn't sell much of its production and booked extra-high taxes.
- Yamana is setup to have a very good fourth quarter as it sells third quarter production and probably will see much lower taxes.
What It Really Costs To Mine Gold: The Agnico Eagle Third Quarter Edition
- Agnico Eagle’s costs on both a core and a core non-tax basis have continued to rise as it saw its highest costs in 2014 in the third quarter.
- Cost increases were mostly due to a combination of increasedexploration, production, and amortization related costs, and decreased goldproduction compared to the excellent first quarter.
- We're disappointed at the high costs seen in the third quarter but it is not completely unexpected as the company continues to integrate its new acquisitions.
What It Really Costs To Mine Gold: The Newmont Gold Third Quarter Edition
- Newmont’s costs on both a core and core non-tax cost basis have risen to the highest levels of 2014.
- Investors shouldn't be too concerned as in the current quarter copper production was drastically reduced due to issues at Batu Hitau.
- Newmont has received large tax reimbursements over every quarter in 2014. This isn't sustainable and increased taxation should have a negative impact on future core costs.
What It Really Costs To Mine Gold: The Barrick Gold Third Quarter Edition
- Barrick’s gold-equivalent production costs on both a core and a core non-tax basis fell noticeably in the third quarter.
- Third quarter cost decreases were due to a combination of increased production and lower nominal costs.
- Though the company had a very good quarter, investors should still be careful as it will be important to see the company maintain its cost structure moving forward.
There Are Strange Things Happening With The Gold Held At The Gold ETFs
- Gold ETFs are continuing to see withdrawals of physical gold despite increases seen in physical silver at silver ETFs.
- Gold withdrawals are not strictly correlated to the gold price. Otherwise, we wouldn't see that discrepancy.
- Gold withdrawals may be a way for bullion banks to satisfy Asian gold demand as they began approximately the same time Chinese gold demand skyrocketed.
- Thus investors should look at the decline in gold held at the GLD ETF as a bullish sign.
Update: Randgold Reports Strong Earnings And Is Well Prepared To Respond To The Ebola Crisis
- Randgold reported strong earnings that surprised the market, as it increased gold production sequentially.
- The company also revealed that it is actively and regularly preparing for any Ebola outbreak, to help minimize the impact on operations.
- Investors should greatly lower any risk premium associated with Ebola.
What It Really Costs To Mine Gold: The Goldcorp Third Quarter Edition
- Goldcorp’s costs on both a core and a core non-tax basis rose significantly on a year-over year basis.
- This rise was due to increasing costs and lower gold-equivalent production due to operating issues at some of the company's mines.
- We expect production to rise again in upcoming quarters and capital spending to decrease into 2015.
- For gold investors, the fact that costs are well above the current gold price suggest that the current gold price is too low to be sustainable in the long-term.
The Next Steps For Gold Investors
- Precious Metals investors need to make sure they construct their investment thesis to help them select their gold investments.
- The current price for gold is unsustainable as most miners sell it for above their current all-in costs.
- Exploration budgets at miners have been cut significantly and that means that we think acquisitions will be the name of the game in the next few years.
- Investors should look for miners with good balance sheets and a significant portion of their valuations in "in-ground" reserves.
- Investors should look for developers and explorers that have the characteristics of a good acquisition and enough cash to avoid desperation deals and dilution.