Gold Stocks Roundup - NFL Edition

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Includes: ABX, AEM, ANV, AUY, CAGDF, DRGDF, EGO, FNV, GFI, GG, IAG, RGLD, RIOM, TAHO, WPM
by: Charles Sherwood

Summary

With 2014 coming to a close, what better way to wrap up the year than comparing a few key gold stocks to some NFL teams.

Barrick Gold and Goldcorp continue to disappoint, while Gold Fields and Franco-Nevada outperformed.

Yamana Gold and Allied Nevada may be worse than the Tennessee Titans, Chicago Bears, Tampa Bay Buccaneers and New York Jets combined.

With 2014 coming to a close and the NFL regular season ending shortly, what better way to wrap up the year than with a review of some key gold stocks by comparing them to NFL teams, just to make things more exciting, and give me a chance to poke a bit of fun at the expense of other people's favorite teams. As always 2014 was full of excitement, surprises, moments that will be talked about for years to come and moments that no matter how hard we wish we could, we will never be able to forget. Without further ado I present you with the unexpected winners, long time favorites who have fallen from grace, losers plunging deeper into the abyss and the top teams who just keep on winning.

Barrick Gold - San Francisco 49ers

Down over 30% year to date, Barrick Gold (NYSE: ABX), like the San Francisco 49ers, has been a major disappointment for investors this year. Barrick Gold has a mountain of long term debt to the tune of $12.9 billion, which has to be as concerning to investors as the debt on the newly minted Levi's stadium is to the 49ers brass who are hoping Colin Kaepernick's arm will drive ticket sales over the next several years. Barrick does have significant liquidity of $2.7 billion in cash at the end of the third quarter; however that could disappear faster than Jim Harbaugh at the end of this season if Barrick decides to resurrect its Pascua-Lama project. With roughly $5 billion already spent and the project currently on care and maintenance, Barrick Gold has stated they estimate that the project will take another $4 billion to complete. Barrick is looking at the possibility of a strategic partnership or royalty and streaming agreements as ways to reduce costs. With past capital project spending having far exceeded estimates, it is easy to imagine the $4 billion estimate to complete the project ballooning way out of control, kind of like Colin Kaepernick's ego prior to the recent 49ers meltdown.

Gold Fields - Green Bay Packers

Gold Fields (NYSE: GFI) is up more than 30% year to date and has been one of the strongest performing gold majors this year allowing investors to just R-E-L-A-X in the infamous words of signal caller Aaron Rodgers. Gold Fields has managed to generate strong cash flow, while keeping costs low, kind of like how the Packers organization gets fans to shovel out snow from Lambeau Field for free every year. In the third quarter they achieved $63 million in cash flow from operations bringing the year to date total to $182 million. They also achieved a 12% free cash flow margin rate for the third quarter. Gold Fields does have a significant amount of debt, which is a bit of a concern; however, they appear committed to reducing their debt which they managed to reduce by US$137 million in the third quarter, which brings total net debt reduction for the year to date to US$237 million. Total net debt now stands at $1.5 billion giving Gold Fields a net debt to EBITDA ratio of 1.33. In the longer term, the success of Gold Fields' South Deep mine will likely be the ultimate driver of the stock. Gold Fields has struggled to develop and ramp up South Deep as badly as Aaron Rodgers and the Pack struggled in Buffalo and there still remains a lot of uncertainty surrounding the mine. With $3 billion spent to acquire South Deep and another $1 billion or so already spend on development, South Deep has been a disappointment so far. Success at South Deep would be a game changer for Gold Fields as South Deep hosts one of the world's largest deposits, with resources of 76.2 million ounces along with reserves of 38.2 million ounces.

Allied Nevada - Chicago Bears

Allied Nevada (NYSEMKT: ANV) has been one of the worst performing gold stocks this year, performing worse than Jay Cutler. Allied Nevada was recently forced to issue stock in order to raise enough money to keep the lights on for a few more months while they try to find a partner for their Hycroft mine, or raise money through a royalty or income stream. While this may be a nearly impossible task, it may have slightly more likelihood that finding talent inside the Bears locker room. As of November 30, Allied Nevada had only $1.3 million in cash and cash equivalents (which is ironically the likely amount that Brandon Marshall will get paid to box the Detroit Lions fan that made fun of his momma) which was down from the $5.8 million they had in cash and cash equivalents at the end of the third quarter. Like Bears coach Marc Trestman, Allied Nevada has downplayed the severity of their situation throughout the year, stating, however unrealistic it may be that they are seeking funding for their Hycroft mine. The company, like Jay Cutler's future is in a very bad situation to say the least and is facing the real possibility of bankruptcy. At least we know Cutler is not going bankrupt after he took the Bears to the cleaners with his new contract.

Centerra Gold - Oakland Raiders

Centerra Gold (OTCMKTS: OTCPK:CAGDF) as usual has had quite an interesting year between threats of nationalization at their flagship Kumtor mine, serious protests that shut down Kumtor for a time and being involved in messy litigation. However, through all of this Centerra has managed to continue to operate their Kumtor mine, like the Oakland Raiders have managed to stay in Oakland. What is worrisome about Centerra is the pressure to nationalize Kumtor seems to have reached a fever pitch - oops wrong kind of football. Even the president of the Kyrgyz Republic, who has worked tirelessly to negotiate a new deal with Centerra has recently admitted that nationalization may be the only option. Maybe Derek Carr can lead a prayer for Centerra while he is praying for the Raiders next win. Despite all this, the stock has actually performed quite well this year, though it has been quite a roller-coaster ride. Centerra Gold reported a third quarter loss of $3.2 million compared to a loss of $1.8 million in the corresponding period last year. Revenue decreased from $155 million in the third quarter of 2013 to $135.8 million this quarter as gold prices dropped. Centerra managed to lower all-in sustaining costs from $1208 an ounce in the third quarter of 2013 to $1139 an ounce this quarter and revised production estimates upwards to 600,000 to 650,000 ounces from their previous guidance of 595,000 to 645,000 ounces as higher gold production is expected to be achieved at their Boroo mine in Mongolia. Like the Raiders, Centerra has been a survivor, but for how long is anyone's guess.

Detour Gold - Cincinnati Bengals

Speaking of roller coasters, Detour Gold (OTCMKTS: OTCPK:DRGDF) has been a wild rollercoaster this year as the stock has been more unpredictable than Bengals vs. Browns games. At the end of last year, a perfect storm of investor worry over whether Andy Dalton could ever win a playoff game, uh, I mean investor worry over a slower than anticipated ramp up, production not meeting targets and a CEO resignation, caused the stock to trade down under $4 a share. As Detour continued to ramp up through the year, like the Bengals are apt to do through the regular season - before busting out in the playoffs, investor worries seemed to subside and at one point the stock traded over $14 a share. Detour Gold is an attractive company due to the massive size of its Detour Lake mine -it's no midget like Johnny Football, that will produce roughly 600,000 ounces per year over its' first ten years and has a mine life of over 20 years. However, Detour Lake is a relatively high cost producer and is highly leveraged to the price of gold.

Agnico-Eagle - Miami Dolphins

Like the Miami Dolphins, Agnico-Eagle (NYSE: AEM) got off to a strong start to the year, buoyed by strong first quarter results mainly due to higher gold production and the joint acquisition with Yamana Gold of Osisko's Canadian Malarctic mine which was generally seen by investors as favorable for Agnico-Eagle. However, weaker second and third quarter results have pushed the stock back down to the level it began the year at. First quarter net income was $109 million, while second quarter net income came in at $38 million and in the third quarter it dropped further to a loss of $15.1 million mainly due to a rise in production costs. It should be noted that a substantial amount of these production costs were due to the addition of production costs from new mines. Agnico-Eagle has raised their production guidance for 2015 and is now projecting to produce 1.6 million ounces of gold. In a similar vein, I believe I just heard Joe Philbin projecting the Miami Dolphins will make the playoffs...next year.

Tahoe Resources - Cleveland Browns

Okay so this one if not a gold stock, but I decided to mess with you a bit, just like Rams coach Jeff Fisher when he sent out all the players traded to the Rams in the RGIII trade to take the coin toss against RGIII. Tahoe Resources (NYSE: TAHO) has had quite an interesting year as the stock, like the Browns started off the year really well with things looking positive as ramp up at their flagship Escobal mine went well. However, like Johnny Manziel's debut - seriously why does this guy get the nickname Johnny Football when he can't even put a point on the board, recent events have been less positive for Tahoe. The Guatemalan government recently announced it had passed legislation that would increase the royalty rate that Tahoe Resources pays from 5% to 10% which is a substantial increase. Imagine trying to tell the DAWG POUND that ticket prices had risen in Cleveland from $5 to $10. Yeah, that is about how upset Tahoe Resources is, unfortunately though they are desperately trying to lobby the government, there doesn't appear to be much they can do about it. According to a Financial Post article, BMO Capital Markets analyst Andrew Kaip calculated that the tax hike reduces Tahoe's net present value by roughly 11% at spot metal prices, and earnings per share are expected to decline 15%. The legislation has yet to be signed into law by the president, but it represents a serious blow to Tahoe Resource's value since the Escobal mine is their only asset, kind of like Josh Gordon is to the Browns. Sorry Browns fans, but you didn't really think you were going to make the playoffs, did you?

Iamgold - Minnesota Vikings

It has been an eventful year for Iamgold (NYSE: IAG), but like the Vikings I think they are slowly moving in the right direction. As one of the higher cost producers, Iamgold's share price has been hit harder over the last couple years than... fans walking to the game in a December blizzard - that wasn't what I was going to say, but trying to be somewhat professional here. This year, the share price was relatively flat for the first half of the year, with some sharp declines over the latter part. Despite this, Iamgold seems to be taking steps in the right direction having managed to continue their cost reduction and selling their Niobec mine for roughly $500 million in proceeds. This transaction sets Iamgold up as a pure gold play and provides them with substantial liquidity. On the cost reduction front, Iamgold reported its third consecutive quarter of declining costs with third quarter all-in sustaining costs of $1115 an ounce, which are still high but were an 8% decrease from the same quarter last year. Whew, managed to get through that without one Adrian Peterson reference... almost.

Eldorado Gold - Arizona Cardinals

Eldorado Gold (NYSE: EGO) is one of the lowest cost producers which has allowed them to fare reasonably well over the past year despite the drop in gold prices, which is not dissimilar to how the Cards have managed to fare despite losing most of their star players . For their third quarter, all-in sustaining costs came in at an impressive $735 an ounce, which is nearly as impressive as Bruce Arians sideline swagger. This was a decrease from the year to date average of $784 an ounce. Eldorado's third quarter results were disappointing, however, with revenue and income both declining from the third quarter last year. Part of the reason for the income decline was a $7.6 million inventory write-down against gross profit for Vila Nova as a result of the continued fall in iron ore prices. Eldorado continued to generate solid cash flows from operations, with $78.7 million being generated in the third quarter, though this was also a decline from the $104.8 million generated in the third quarter last year. Eldorado's producing mines are all in Turkey, China, Greece and Brazil which means there is some country risk involved with Eldorado, just as I assume there has to be risk betting on the Cardinals to make a serious playoff run without Carson Palmer, or Drew Stanton, or Andre Ellington, or half their defense, or.., well I think you get the picture. In the third quarter, Eldorado paid an exceptionally high tax rate due to the impact of the fall in the Turkish Lira. Eldorado does have a solid cash position with $539.5 million in cash at the end of the quarter, compared with debt of $586.6 million. Growth for Eldorado will come from their development projects of which Eldorado has a major project that is set to come online in 2016 that will boost total production substantially. The Skouries project in Greece will be an open pit and underground gold-copper mine projected to produce 140,000 ounces of gold per year and 30,000 tons of copper per year over the 27 year life of the mine.

Rio Alto Mining - New England Patriots

Rio Alto (NYSE: RIOM) much like the Patriots has had a good year as they have consistently reported solid results and the third quarter was no exception. For the third quarter, Rio Alto reported net income of $21.3 million compared to net income of $15.9 million in the third quarter last year, with cash provided by operations of $30.9 million. All-in sustaining costs came in at $783 an ounce for the quarter and Rio Alto lowered their 2014 all-in sustaining costs guidance from a range of $824 to $911 an ounce to $775 to $800 an ounce. It has also been a busy year for Rio Alto as they acquired Sulliden Gold, giving them the Shahuindo project which is located close to their La Arena mine. The two projects have similar geology and will utilize similar mining and processing methods which should allow Rio Alto to lower costs even further because of the synergies between the two mines. Rio Alto is currently working on a feasibility study on the economic viability of the La Arena Phase II Copper/Gold Sulphide project, which they expect to be completed early in 2015. There is some risk that the feasibility study results may show the project is not as economical as hoped, and if that happens expect shareholders have a more visceral reaction than Tom Brady after watching Aaron Rodgers lead the Packers to a game winning touching drive against the Pats. Rio Alto's management, like Bill Belichick has a good track record of delivering strong results and I believe this stock will continue to outperform in 2015.

Yamana Gold - New York Jets

Yamana Gold (NYSE: AUY) has been one of the most beaten down gold stocks of 2014, down more than 50%, year to date which is down more than the Jets fan base. Yamana missed earnings estimates in both the first and third quarter and slashed its dividend this year as well. While Yamana enjoys low costs, they have taken a massive third quarter hit to the tune of $1.02 billion mainly as a result of impairment charges and changes to Chilean tax rates which caused a deferred income tax liability. For the third quarter, Yamana Gold reported an adjusted loss of $12.5 million compared to adjusted earnings of $69.5 million in the same quarter last year. It wasn't all negative for Yamana Gold though. Cash flows from operating activities after changes in non-cash working capital were $158.9 million in the third quarter, compared to $99.0 million last year. In the third quarter Yamana hit record production of 391,277 gold equivalent ounces which was 27% higher than the same quarter last year. Yamana, along with partner Agnico-Eagle purchased Osisko and their Canadian Malartic mine which as their second largest producing mine had a positive impact on third quarter income, but also increased long term debt which has ballooned from $1.2 billion at the end of the third quarter last year to $2.0 billion at the end of the third quarter this year. While Yamana Gold may rebound just as Rex Ryan's career may rebound, at this point things are looking pretty ugly. Just don't tell Geno Smith that as he seems to be under the impression that there have been Pro Bowl caliber moments this year.

Franco-Nevada Corp - Detroit Lions

Franco Nevada (NYSE: FNV) has enjoyed a solid year, with the stock up roughly 20% year to date. It seems strange to say the Lions have also had a very solid year other than that embarrassing incident where linebacker Stephen Tulloch injured himself while celebrating a sack. For Franco-Nevada, it has been a year marked by large purchases as well as a large equity raise. In August, Franco-Nevada raised $500 million in new equity capital and year to date they have spent over $900 million in investments, including their massive $648 million purchase of the Candelaria stream. Despite all this spending, Franco-Nevada has a pristine balance sheet with nearly $600 million in cash even after purchasing the Candelaria stream. Like others in the gold sector, Franco-Nevada has been impacted by the lower gold price; however, Franco-Nevada has offset this through increasing revenue as a result of an increase of 16.9% in gold equivalent ounces so far this year. Third quarter revenue increased from $98.8 million in the third quarter of 2013 to $107.6 million in the third quarter this year. Net income for the quarter was $31.9 million, compared with $35.3 million for the same period in 2013. While Franco-Nevada is mainly a gold royalty/streaming company it is important to remember that they also derive a significant amount of their revenue from platinum group metals and oil and gas assets. For 2014 so far, Franc-Nevada received 20% of their revenue from oil and gas assets (of which 94% was oil) which is a substantial amount. With oil prices having dropped so much, Franco-Nevada's revenue will be impacted somewhat, however, this will be more than offset by the gold production that will be received from the Candelaria stream. Franco Nevada's stock is quite expensive, but investors pay a premium for Franco-Nevada's solid earnings and 2014 has been no exception. However, as Lions fans know only too well, this thing could come back down to earth quickly at the first sign of anything negative.

Royal Gold - Dallas Cowboys

Before, I talk about Royal Gold, I just can't believe that it is December and the Dallas Cowboys actually won an important Sunday Night Football game against their divisional rival, Philadelphia Eagles. Like America's team, Royal Gold (NASDAQ: RGLD) has had a strong year, posting year to date gains of nearly 30% on the basis of strong quarterly results. Royal Gold entered into a major streaming arrangement with Euromax Resources for $175.0 million on their Ilovitza project. The deal calls for Royal Gold to receive 25% of gold produced until 525,000 ounces have been delivered, and 12.5% thereafter. Royal Gold's purchase price per ounce will be 25% of the spot price at time of delivery making this a lucrative stream. Royal Gold reported stronger quarterly results than Dez Bryant's breath when he is fuming on the sidelines at anyone who will listen, with net income of $18.7 million as compared to net income of $15.2 million in the same quarter last year. Revenue was $69.0 million for the quarter, compared to revenue of $56.5 million in the comparative quarter of 2013 mainly as a result of the production from the Mt. Milligan stream. Net cash provided by operating activities came in at $52.5 million for the quarter compared to $35.5 million last year primarily due to an increase in proceeds received from royalties. Like Franco-Nevada, Royal Gold is sitting on a pile of cash, with nearly $500 million in hand following the purchase of the stream on the Ilovitza project and as such is well positioned to take advantage of the difficult financing climate facing many gold juniors. If Royal Gold were interested they just might be able to diversify and purchase Dez Bryant's new contract with their $500 million.

Silver Wheaton - Denver Broncos

Ok, this is not a legitimate gold stock either, but then again the Tennessee Titans, Tampa Bay Buccaneers and Jacksonville Jaguars aren't really serious NFL teams. Silver Wheaton (NYSE: SLW) has had a more difficult year that their peers, Franco-Nevada and Royal Gold with the stock essentially flat for the year, kind of like Peyton Manning's singing in those cheesy Nationwide commercials. This can be attributed to several factors: silver prices falling more than gold prices, lower production by Silver Wheaton and lack of new deals to boost investor confidence. For the third quarter, silver production was down 7% and so far it looks like Silver Wheaton will not meet their production goals for the year. Maybe what Silver Wheaton needs is some performance enhancing drugs. Does anyone know Matt Prater's number? Net earnings dropped more sharply than Wes Welker's reception total, mainly as a result of impairment charges on their Mineral Park and Campo Morado silver interests. Adjusted net earnings decreased 6% in the third quarter compared to the third quarter last year. Operating cash flows were up slightly at 1%. Silver Wheaton does not have as much cash on hand as Franco-Nevada or Royal Gold, but they still have $233 million in cash and a $1 billion credit facility which means they have significant ability to purchase royalty or streaming arrangements. While Silver Wheaton has had a difficult year, like the Broncos, Silver Wheaton is still a force to be reckoned with in the silver space.

Goldcorp - New Orleans Saints

It has been a trying year for Goldcorp (NYSE: GG), with the stock down over 15% year to date, similar to the bank accounts of bettors who thought winning at the Superdome was a sure thing. Like the Bountygate scandal, the third quarter was particularly unpleasant, with Goldcorp swinging to a loss of $44 million compared with earnings of $5 million in the third quarter last year. Adjusted earnings were $70 million compared to $190 million in the same quarter last year mainly attributable to lower gold prices and an increase in production costs and tax rates. Revenue was down from $895 million to $859 million despite an increase in gold produced and gold sold. Worse for Goldcorp, costs in the third quarter were on the rise while their cash was seriously drained. All-in sustaining costs for the third quarter rose from $995 an ounce in the third quarter of 2013 to $1,066 an ounce. Cash and cash equivalents dropped to $376 million from $1.22 billion in the second quarter. One positive for Goldcorp this year has been achieving production, though not yet commercial production at the Cerro Negro mine from which they are estimating to produce at the lower end of the 130,000 to 180,000 ounce mark this year. Kind of like the one positive for the Saints is despite how abysmal they have been this year, they still have a shot at going on a playoff run.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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