Earnings season has, so far, been a mixed bag for most industries. But for gold and silver miners this is one for the record books.
One of the selling points of precious metals miners is that they’re “leveraged to the gold/silver price”, which means a small move in the price of the underlying metal produces a big change in a miner’s profitability. This is bad when the metals are going down but potentially great when they’re going up. And right now the math is highly favorable: Gold and silver are up from a year ago, so miners that produce similar amounts of metal at a similar per-ounce cost are generating big earnings increases. Some excerpts from recent quarterly reports:
Barrick Gold Earnings Jump 45%
Higher gold and copper prices pushed Barrick Gold Corp.’s third-quarter earnings up 45% to a record level, beating analyst expectations.Barrick, which late Wednesday boosted its quarterly dividend by 25%, posted net income of $1.37 billion, or $1.36 a share, up from $942 million, or 94 cents a share, a year earlier. Adjusted earnings jumped more than 50% to $1.39 billion, or $1.39 a share, it said, beating the Thomson Reuters mean estimate of $1.35 a share.
Revenue increased 44% to $4.01 billion, ahead of the $3.88 billion analysts were expecting, as Barrick’s realized gold price rose 41% to $1,743 an ounce.
Eldorado Gold posts 48% Q3 profit growth on record gold production
Eldorado Gold (TSE:ELD) (NYSE:EGO) (ASX:EAU) saw its third quarter results meet or exceed Street estimates on Thursday after it reported record gold production, higher selling prices, and lower operating costs. For the three months ending September 30, the gold miner posted profits of $110.7 million, or $0.19 per share, up 48 percent from $74.8 million, or $0.13 per share, a year ago.Revenues rose 71 percent to $326.1 million, from $190.3 million in the same period last year. Analysts polled by Bloomberg Businessweek had expected 19-cents per share in earnings, on $311 million in sales.
The company produced a quarterly record total of 179,195 ounces of gold – 18 percent more than it did a year ago. Total cash operating costs fell three percent to $397 per ounce, while selling prices rose 38 percent to $1,700 per ounce during the third quarter.
Kinross Reports Rise In 3Q Adjusted Earnings, Record Quarterly Revenue
Kinross Gold Corp. (TSX: K, NYSE: KGC) posted adjusted net earnings of $273.4 million, or 24 cents a share, for the third quarter, the company said late Wednesday. This was up by 134% from $116.8 million, or 15 cents a share, in the year-ago period.The company listed record quarterly revenue of $1.069 billion, a 45% increase over $735.5 million in the third quarter of 2010. The increase was the result of more ounces produced and an average realized gold price of $1,646 an ounce in the third quarter, compared to $1,190 in the third quarter of 2010.
Royal Gold Revenue Grows Again by Double-Digits
Net income for Royal Gold, Inc. rose to $17.2 million (40 cents per share) vs. $11.8 million (21 cents per share) in the same quarter a year earlier. This marks a rise of 45.3% from the year earlier quarter.Revenue: Rose 42.2% to $64.5 million from the year earlier quarter.
The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 56.4%, with the biggest boost coming in the first quarter of the last fiscal year when revenue rose 73.6% from the year earlier quarter.
Yamana Gold Announces Third Quarter 2011 Results
Production of 279,274 gold equivalent ounces (GEO) at cash costs of $94 per GEO. Gold production of 230,986 ounces. Silver production of 2.4 million ounces. Production increased 4% to 279,274 GEO. Revenue increased 22% to $555 million. Record adjusted earnings increased 63% to $190 million, $0.26 per share. Cash flow generated from operations increased 57% to $330 million, $0.44 per share. Generated cash margin of $1,603 per ounce, an increase of 36%. Cash and cash equivalents at September 30, 2011 were $570 million, a 73% increase from the beginning of the year. Cash flow generated from operations increased 66% to over $945 million, $1.27 per share, as at September 30, 2011. Dividend increased for the second time this year to $0.20 per share annually
Some thoughts
Comparisons will stay favorable for another couple of quarters and then get harder, as next year’s gold/silver price is compared with August’s parabolic spike. The sense that these growth rates are unsustainable might be one of the things holding back mining stocks in the face of great current earnings.
But if gold and silver just hold their current levels, the cash flow being generated by the strongest miners will allow them to 1) pay off debt and strengthen their balance sheets and 2) institute or increase dividends.
It’s possible that a year from now the precious metals miners will appeal to both growth and income oriented investors. That’s a lot of potential cash flowing into what is still a tiny sector.
11 thoughts on "Gold Miners Are Growth Stocks Now"
If you ask me, I’d say that we need to get some descent roadway repair here in Minneapolis before we spend more money of accident cleanup than we do on anything else in this town.
I agree but I’m concerned the markets won’t hold up long enough for these gold mining stocks to make good gains before the whole house of cards comes crashing down – see here:
http://www.prlog.org/11726093-is-the-dollar-collapsing-economic-armageddon-survival-guide.html
OH YES, THIs time will be different! I’ve been reading predictions of gold and silver stocks going parabolic for five years on this website. All those predictions were wrong, but THIS ONE IS DIFFERENT! Of course, the big moves in gold and silver stocks are RIGHT AROUND THE CORNER! JUST HANG ON FOR A FEW MORE MONTHS/YEARS, and while you’re waiting BUY MULTIPLE COPIES of the DOLLAR COLLAPSE BOOK, and BUY PRODUCTS from our SPONSORS so John Rubino can fly first-class to visit zillionaire James Turk in his palatial mansion in Spain.
(Please ignore Jason Emery’s comment above, and KEEP DRINKING THE PERMA-BULL, HAPPY-TIME, TURK-RUBINO KOOL AID!)
i too, believe another lehman is coming. I’ll buy then. Keep your eyes on
Europe
I never bet against Mr Rubino’s advice, although I’m sure he’s not perfect.
Read the following to see what Mining shares did between 1975 and 1980
http://seekingalpha.com/article/241664-the-three-phases-of-every-secular-bull-market-in-gold
Excerpt from the link above:
We believe phase III of the current bull market may be able to yield a speculative exploration crop superior to the 1975-80 list below:
Name / 1975 / 1980
Lion Mines / $0.07/share / $380/share
Bankeno / $1.25 / $430
Wharf Resources / $0.40 / $560
Steep Rock / $.93 / $440
Mineral Resources / $.60 / $415
Azure Resources / $0.05 / $109
An investment in Lion Mines of $700 (10,000 shares) in 1975 would have netted a total profit of around $3,799,300 if held for the five years.
I basically agree with “paper is poverty”. I trade the gold mining shares with targeted buy and sell orders for several reasons, the main one being that I too expect another 2008 “crash” fairly soon that will provide major medium/long-term buying opportunities.
The “problem” with mining companies is that they are so poorly managed and are, therefore, unreliable. Considering how gold/silver is viewed broadly (e.g., “gold bug” = paranoid fanatic), the people who actually devote their lives to that business are “over the top”, or are “geniuses” with all that that implies. The bottom line is that mining shares are speculative no matter the logistics because weird things can go on within the individual businesses that you may never know about nor understand. Diversify. Physical should be your core because stocks are still paper and are priced only in more of the same.
…if i buy gold, hoping that the price will rise subsequently because of course there is now less for everybody else, i would hope that all the gold mines would close up shop and this would mean less gold for everybody else too…
Over the last 12 months, the price of gold (pog) has gone from $1400/oz to currently $1750/oz. Nice gain. But two of your listed stocks, Barrick and Eldorado have just gone sideways, and a third, Kinross is down. The only one of your mentioned stocks that is up is Royal Gold, and they are not a gold miner. They make their money from their holdings of NSR’s (net smelter royalty), which is somewhat similar to an open call option on the POG.
Your last stock, Yamana is up over the last year, but is still 20% BELOW where it was in early 2008 when gold was trading at $1000/oz.
So, unwittingly, you have made a strong argument AGAINST gold stocks, and IN FAVOR of gold itself, or those vehicles that are directly tied to it. Gold mining companies are not in that category. They are only tangentially tied to the price of gold. I should know. I own a few, and have watched helplessly as they underperform gold, year after year, lol.
There are many reasons why gold stocks could under perform gold, even if their earnings rise. The PE multiple of their stock could drop, there could be some single country/region risk priced in, and other reasons.
But there tends to be regression to the mean, right? If the HUI vs. the gold price (the ratio) has been below the average for a while, it should return to the mean (and overshoot). So we should expect a period of out-performance in the metals stocks… at some point.
Maybe the metals stocks won’t outperform until there’s a drastic physical shortage and the best way to source metals is to take a stake in a mining company and strike a deal that way (as China does). But if that’s the way it goes — if things stay like this until the Comex breaks, and the ETFs are exposed as frauds — that would mean an explosive move in the metals stocks. You wouldn’t want to miss that one.
This being said, I don’t own gold or silver stocks currently because it still seems to me we’re heading for another 2008, this time led by European banks. I’m waiting for that back-up-the-truck opportunity after equities have been decimated. Maybe the real problem is that metals bugs tend to be very pessimistic.
Yamana! Yamana! Yamana! Eees good enough for me!
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