Gold miner earnings ahead; can rally be sustained?


The big question as gold miners earnings results begin to roll in next week - "Can miners cut costs fast enough to satisfy investors?"

JPMorgan's John Bridges expects an average reduction in all-in costs of about $100 per ounce this year, and notes the mid-point of recent Goldcorp (GG) guidance was $90. However, he adds, while some of the savings are sustainable, deferring things like truck and equipment purchases can't go on forever. He notes Kinross (KGC -0.2%) announced a 40% reduction in capex this year, but suggested reinvestment would be required at some point.

Ahead of results, the Gold Miners ETF (GDX +1.2%) continues its big 2014, now up 9.6% YTD.

First up on the earnings front is New Gold (NGD) next Thursday, followed by Kinross six days later, and then Barrick Gold (ABX) the day after that.

Miner ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DGZ, AGOL, DGLD, GLDI, TBAR, UBG

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Comments (4)
  • filipo
    , contributor
    Comments (4652) | Send Message
     
    Energy prices aren't so helpful either.
    28 Jan 2014, 03:28 PM Reply Like
  • steez
    , contributor
    Comments (2) | Send Message
     
    Do you mean Kinross (KGC)?
    28 Jan 2014, 05:42 PM Reply Like
  • techy46
    , contributor
    Comments (11500) | Send Message
     
    If ABX backs off production to 6.4 million ounces they could actually reduce all-in-costs to around $800 which gives them a $300-400 gross margin at $1100-1200 gold price. That's $150 better then the current $950 costs. The math is then $2,24 billion GP at 6.4 million vs $1.85 at 7.4 million production level. In mining increased gross profits at reduced revnues make a whole lot of sense.
    28 Jan 2014, 06:00 PM Reply Like
  • economist11
    , contributor
    Comments (80) | Send Message
     
    Costs are difficult to cut in the short run. Cost cutting includes an honest reexamination of assumptions in your operating model. Those companies employing objective thinking rather than gut level decisions will do best.
    28 Jan 2014, 06:27 PM Reply Like
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