Friday, October 31, 2014
- In another miserable day for gold miner stocks, Newmont Mining (NEM -7.7%) is lagging most peers as investors decide its Q3 earnings beat is not as impressive as it looks, particularly in a declining gold price environment.
- Deutsche Bank, cutting its price target on the shares to $20 from $25, notes that NEM reported a wide EBITDA miss, posting $378M vs. $465M consensus; the firm says NEM's free cash flow outlook is turning negative on weaker than expected operational results and with capex spend projected to rise ~$350M in 2015.
- Cliffs Natural Resources (CLF +8.7%) spikes higher on a WSJ report that Nucor (NUE +1.2%) is in talks to invest in CLF’s Bloom Lake iron ore mine in Quebec.
- Two Japanese steel companies reportedly would also be part of the venture, which would allow CLF to more than double production at the mine to 13.5M tons/year; the three partners and another existing Japanese partner would buy the iron ore produced at the mine.
- The partnership apparently would allow CLF to make Broom Lake profitable, after taking a $6B writedown earlier this month mostly related to the mine.
- Eastman Chemical (EMN +5.5%) surges after reporting Q3 earnings that topped expectations and revenue growth at most of its main businesses.
- EMN raises its estimated FY 2014 EPS to $7.00 from a prior outlook of $6.70-$7.00, expecting strong Q4 results as demand remains solid with normal seasonality, product mix improvement continues, and raw material and energy costs are a tailwind.
- Precious metals miners are slammed for a third straight session as gold prices plunged to multiyear lows.
- Japan’s surprise stimulus move is supporting the U.S. dollar and driving the ICE U.S. Dollar index to a four-year high, making gold more expensive to overseas buyers; while the prospect for more monetary stimulus usually increases the lure of gold, the threat of global deflation has withered gold’s appeal as a hedge against rising prices, Barron's Chris Dieterich explains.
- Nearly everyone in the sector is hitting 52-week lows (again): ABX -4.5%, NEM -7.7%, GG -0.5%, SLW -3.6%, AGI -5.8%, AEM -4.1%, AUY -10.6%, IAG -4.6%, KGC -16.2%, NGD -6.1%, AU -2%, GOLD -1.6%.
- Also: GFI -7.4%, RGLD -3.8%.
- ETFs: GDX, GDXJ, NUGT, DUST, SIL, JNUG, GLDX, JDST, SLVP, RING, SGDM, PSAU
- Freeport McMoRan (NYSE:FCX) +2.9% premarket after the mine workers union cancels a planned one-month strike at the company's Grasberg copper mine in Indonesia due to start next week.
- Three unions representing nearly 11K workers had agreed to take strike action from Nov. 6 until Dec. 6, demanding management changes following the death of four workers in a Sept. 27 accident.
- A dispute between Ivanhoe Mines (OTCPK:IVPAF) and South Africa's mining ministry is delaying construction of the world's biggest platinum mine planned since 1993.
- South Africa’s Department of Mineral Resources delayed authorization to start building the $1.6B Platreef mine by 12 weeks to a target date of Nov. 26, saying some elements of Ivanhoe’s plan to benefit the surrounding community were insufficient, Bloomberg reports.
- Platreef is projected to produce at least 785K oz. of platinum, palladium, rhodium and gold by 2024.
- One would think the BOJ's move to more than double purchases of JGBs and triple purchases of ETFs and REITs would put a bid under gold, but not so.
- Off 2.1% to $1,174 per ounce, gold has tumbled about $75 over the past handful of sessions and broken through a multi-year low set late last year. One would have to go all the way back to the summer of 2011 to see gold priced here.
- Silver is down 2.1% to $16.07, its lowest price since early 2010.
- GLD -2%, SLV -2.4% premarket
- ETFs: GLD, SLV, AGQ, IAU, USLV, SIVR, SGOL, ZSL, UGL, DGP, GLL, UGLD, DZZ, SLVO, GLDI, DSLV, OUNZ, DGL, DBS, DGZ, DGLD, AGOL, TBAR, USV, UBG, GLDE, BAR, GYEN, GEUR, BARS, GGBP
Thursday, October 30, 2014
- Newmont Mining (NYSE:NEM) +1.6% AH after adjusted Q3 earnings rose 13% Y/Y and easily beat analyst estimates as costs fell.
- Q3 gold production totaled 1.15M oz., slightly below output of 1.28M oz. in the year-ago quarter, with higher production in Africa following the start-up of Akyem partially offset by lower production in North America primarily due to planned stripping campaigns at Carlin and Twin Creeks which are expected to continue into 2015.
- All-in sustaining costs were $995/oz. vs. $1,018 a year ago.
- Reaffirms its total attributable gold production estimate for the year at 4.7M-5M oz. and copper production of 80K-90K metric tons, and expects costs to come in at the low end of guidance.
- U.S. Steel (NYSE:X) has gained more than 50% during the past six months but Nomura’s Curt Woodworth and Alexander Burnes think it could gain another 50%.
- U.S. Steel is at an annual EBITDA run-rate of $2B and EPS of $5.00, normalizing for a tax rate of 35% even though its recent tax rate has been well below this level; Nomura believes that with additional cost reduction efforts in 2015 coupled with accretive capital deployment into EAF and/or DRI, U.S. Steel should be able to achieve mid-cycle EPS near $6.00 in 2015.
- Shares currently trade at a free cash flow yield of 13% estimated for 2015 and 11% for 2016, which the firm finds compelling.
- Bunge (BG -0.8%) and other grain trading firms likely will face slower crop sales by U.S. farmers in the coming months, potentially hurting trading volumes at major agricultural companies, Bunge CEO Soren Schroder says.
- Falling prices for ag commodities this year caused South American farmers to stash away more of their crops instead of selling them, and their North American counterparts likely will follow suit as they bring in what are projected to be record hauls of corn and soybeans, the CEO says.
- South American farmers’ reluctance to sell their crops to international merchants such as Bunge at cut-rate market prices cut sales in the company’s main agribusiness sector by 8.2% Y/Y to $9.84B, according to BG's Q3 earnings report.
- Bunge says Brazilian farmers so far have sold just 10% of the country’s new soybean crop vs. the usual 30% by this point in the year, and crop producers in Argentina hung onto soybeans as a hedge against inflation.
- One day after the Fed ends QE and focus turns to a rate cut, precious metals are lit up bright red, led by a 4.8% decline in silver (NYSEARCA:SLV) to $16.44 per ounce. Gold (NYSEARCA:GLD) is down 2.15% and back below $1,200 per ounce.
- WTI crude oil (NYSEARCA:USO) is down 1.1% to $81.32 per barrel. Bucking the trend lower is natural gas (NYSEARCA:UNG), up 2.4% to $3.81.
- Bank of America has one of the more hawkish takes on the FOMC statement from yesterday, and continues to believe the Fed will push through its first rate hike in June, though the market has moved to pricing in tightening a few months later.
- ETFs: GLD, SLV, AGQ, IAU, USLV, SIVR, SGOL, ZSL, UGL, DGP, GLL, UGLD, DZZ, SLVO, GLDI, DSLV, OUNZ, DGL, DBS, GLTR, DGZ, DGLD, AGOL, DBP, WITE, TBAR, USV, UBG, JJP, GLDE, BAR, GYEN, GEUR, RGRP, BARS, GGBP, BLNG
- Barrick Gold (ABX -3%) says it may be forced to halt production at its Lumwana copper mine in Zambia if the government proceeds with a proposal that could raise mineral royalties to 20% from the current 6% starting from January next year.
- While Lumwana contributed 75M lbs. out of ABX’s total global production of 131M lbs. of copper during Q3, the company says the application of the new tax regime would challenge the mine’s economic viability.
- The development comes amid a dispute lasting nearly two years between the government and mining companies over tax rebates amounting to $600M, which has compelled some miners to stop expansion projects.
- Goldcorp (NYSE:GG) -1.7% premarket after reporting Q3 earnings and revenues that fell well short of analyst estimates as costs rose.
- Q3 gold production rose 2% Y/Y to 651.7K oz., but average all-in sustaining cost was $1,066/oz., compared with $995/oz. a year ago and much higher than analysts expected.
- GG says it reduced the carrying value of a low-grade ore stockpile at its Penasquito mine in Mexico, which raised average costs by $64/oz. and negatively affected adjusted earnings by $0.04/share.
- Expects FY 2014 gold output will be at the low end of its forecast range of 2.95M-3.1M oz., citing pit wall instability at El Sauzal and the suspension of activities at Los Filos in Q2; expects all-in sustaining costs at the low end of its guidance range of $950-$1,000/oz.
- Full-year capital spending guidance remains unchanged at $2.3B-$2.4B.
- Vale (NYSE:VALE) -6% premarket after reporting a surprising Q3 net loss due a sharp depreciation in the Brazilian real and the lowest iron ore prices since 2010.
- Vale posted a $1.44B Q3 loss from a net profit of $3.5B a year earlier and analyst consensus expectations for a $1.49B net profit, hit by $2.68B in foreign exchange and monetary losses on debt and derivatives; EBITDA fell 48% Y/Y to $3B.
- Vale’s average sales price for iron ore plunged 36% Y/Y to $68.02/ton from $109.93.
- Produced a record 85.7M metric tons of iron ore but inventories rose by 9.3M tons, as protests that closed its main railroad in northern Brazil contributed to stockpiles.
- Since ferrous metals, mostly iron ore, account for nearly two-thirds of Vale’s sales, Q3 net revenues sank 27% Y/Y to $9.06B, the company's lowest revenue since Q1 2010 and below expectations of $9.65B.
- Says it completed construction of its 30M tons/year Teluk Rubiah distribution center in Malaysia, which will allow it to cut costs in Asia, and began operations from its Serra Leste iron ore plant at the Carajas complex in Brazil.
Wednesday, October 29, 2014
- Precious metals miners and the ETFs that track them were slammed today as the Fed moved to end its bond purchase program.
- Today’s 4.3% swoon in the Market Vectors Gold Miners ETF (NYSEARCA:GDX) drives the price below $20 for the first time since Oct. 2008, and the Global X Silver Miners ETF (NYSEARCA:SIL) tumbled 3.5% to its lowest finish since its launch in April 2010.
- The Fed action was expected, but paired with a more upbeat assessment of the U.S. labor market, gold’s appeal is further dampened vs. income generating assets, Barron's Chris Dieterich writes.
- Among individual names today: ABX -5.1%, NEM -4.7%, GG -4.1%, GFI -3.2%, SLW -3.3%, AGI -3.4%, AEM -4.7%, AUY -4.1%, IAG -4.6%, KGC -2.9%, NGD -4.3%, AU -3.3%, RGLD -4.8%, GOLD -2.5%.
- Other ETFs: GLD, SLV, GDXJ, NUGT, AGQ, IAU, DUST, USLV, SIVR, JNUG, SGOL, ZSL, UGL, GLDX, DGP, GLL, UGLD, DZZ, JDST, DSLV, SLVP, OUNZ, DGL, DBS, SILJ, DGZ, RING, DGLD, AGOL, SGDM, PSAU, USV, UBG, BAR, BARS
- Agnico Eagle Mines (NYSE:AEM) -1.7% AH after Q3 earnings and revenues both fall short of analyst expectations.
- AEM's Q3 production totaled ~349K oz. of gold, up 10.6% Y/Y, with average cash costs for producing an ounce of gold on a by-product basis rising to $716/oz. from $591 in the same period last year.
- Expects FY 2014 production of ~1.4M oz., exceeding the upper guidance of company guidance, with total cash costs on a by-product basis of $650-$675/oz.
- AEM raises its FY 2015 production forecast 1.6M oz. from a previous outlook for 1.25M oz., as it expects higher output from its Meadowbank mine in Canada, Kittila mine in Finland and Mexican operations.
- CF Industries (NYSE:CF) says its Woodward nitrogen complex in Oklahoma is shut down for repairs, and expects to take roughly six weeks to return to normal operations.
- The Woodward complex has average annual production capacity for 480K tons of gross ammonia, 820Ktons of UAN, and 25K tons of urea liquor.
- Barrick Gold (NYSE:ABX) +1.1% AH after reporting lower Q3 earnings and a 13% Y/Y drop in revenues due to weaker gold and copper prices and lower sales volumes, but results were ahead of analyst expectations.
- Q3 production totaled 1.65M oz. of gold, -10.6% Y/Y, at all-in sustaining costs of $834/oz. compared with $914/oz. in the same quarter a year ago; ABX's average price for its gold fell to $1,285/oz. from $1,323 a year ago.
- Lowers its 2014 forecast for all-in sustaining costs to $880-$920 per gold oz. from a prior outlook for $900-$940, and narrowed its production forecast range for this year to 6.1M-6.4M oz. from 6M-6.5M prior.
- Raises its forecast for copper production this year to 440M-460M lbs. from a previous forecast of 410M-440M lbs.
- Southern Copper (SCCO -2.4%) reports Q3 earnings of $0.39/share, below the analyst consensus estimate of $0.33, on revenues of $1.48B, up 6/7% Y/Y but slightly below analyst consensus $1.53B, and revises down its forecast for next year's copper output by 9.8% to 758K metric tons.
- SCCO also says it expects to receive a key environmental permit for the $1.2B expansion of its Toquepala mine in Peru in mid-November; work at Toquepala would then start at the beginning of next year, when construction of its $1.4B Tia Maria copper project also is scheduled to begin.
- The expansion at Toquepala is expected to add 100K metric tons to SCCO's annual production capacity.
- Rio Tinto (RIO -2.9%) and Hitachi reportedly will form a strategic partnership in an effort to streamline iron ore mining in the Pilbara region of western Australia.
- Hitachi will provide its information technology for infrastructure management to raise the efficiency of Rio's iron ore mining operations; for example, Hitachi may place sensors on drilling equipment and trains used in transporting the ore, then collect data which can be analyzed to optimize efficiency.
- Rio Tinto has 15 mines, three power plants, four ports and a 1,600 km railway system at Pilbara, where it produces ~290M tons/year of iron ore.