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Barclays' Year-In-Review On Gold

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Barclays' Year-In-Review On Gold
  • Barclays analyst Farooq Hamed shared a review of Canadian gold producers’ operation performance in 2015.
  • The analyst also looked into how these companies are positioned in relation to the guidance provided by management teams ahead of the fourth quarter reporting.

Analysts at Barclays expect the gold companies in their coverage universe to broadly meet production outlooks this year. This would imply a significant improvement from last year, when roughly 30 percent of the aforementioned companies missed their full-year guidance.

The analyst mentioned two companies that stand out for the firm on the back of their "strong operating" years: Agnico Eagle Mines Ltd (USA) (NYSE: AEM) and Newmont Mining Corp (NYSE: NEM). The analysts anticipate operating performance above guidance “slightly better production at lower costs than guided” for Agnico. They expect production and costs to come in at the high ends of their respective guidance ranges for Newmont.

Overall, the firm believes guidance ranges in the industry are achievable. On top of Agnico Eagle Mines and Newmont Mining, they expect Kinross Gold Corporation (USA) (NYSE: KGC) and Eldorado Gold Corp (USA) (NYSE: EGO) to post robust operating results.

On the other hand, Goldcorp Inc. (USA) (NYSE: GG) and Yamana Gold Inc. (USA) (NYSE: AUY) have some risk of falling short of the top end of cost guidance this year.

"Despite our expectation of achievable guidance in 2015 following the exceptionally strong performance delivered 9M YTD, we expect Q4 to be comparably weak to Q3/15 due to declining throughput and grades at various mines. Our preliminary modeling suggests 7% weaker production at 1% higher cash costs q-o-q," the report said.

For the streaming and royalty companies, analysts do expect a stronger fourth quarter, since each of the three companies they cover receives first shipments from new streams: Franco-Nevada Corporation (NYSE: FNV) and Silver Wheaton Corp. (USA) (NYSE: SLW) from Antamina and Royal Gold, Inc USA) (NASDAQ: RGLD) from Pueblo Viejo.

Earnings Over Operations

Hamed explained that, after looking at third quarter results, "earnings more than operations determined the performance of each stock on the first trading session after results were released into the market (…) While this is not necessarily a surprising outcome, it is historically off-trend as post-quarter stock performance for gold companies has historically been more closely associated with operating results and guidance and less so with earnings."

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

Latest Ratings for AEM

DateFirmActionFromTo
Oct 2020BMO CapitalMaintainsOutperform
Oct 2020BarclaysDowngradesOverweightEqual-Weight
Jul 2020ScotiaBankUpgradesSector PerformSector Outperform

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