The Slaughter Continues in the Gold Mining Sector: Huge Miss for Goldcorp & Barrick

Submitted by SD Contributor SRSrocco:

WOW… the Q2 Financial Results for GOLDCORP & BARRICK are atrocious:

As I have previously mentioned, I believed gold miners would suffer less than silver or base metal mining companies this quarter due to the fact that the price of gold topped in Q3 2011.  However, it seems like the SLAUGHTER CONTINUES even in the gold sector. 

Barrick and Goldcorp are in the top 5 gold mining companies in the world… Barrick is number 1.

Here is the results from GOLDCORP:

 

Even though Goldcorp’s revenues are down we have to consider they sold less gold this past quarter.  However, it wasn’t much less than the previous quarter.  If we compare the two, we see that NET EARNINGS DECLINED 44% since the last quarter.  This is more than I would have thought.  Costs are increasing and the price paid for the metal declined.

Furthermore, if we look across all the different past quarters we can see that Goldcorp made a great deal more earnings even though the price of gold was much less than it is currently.  This proves that COSTS ARE INCREASING RAPIDLY.

I did not make a chart for Barrick as their report was not easy to reproduce here.  I can say this, their Q2 gold production is down and their earnings were as follows:

2011 Q2 Results

REVENUES = $3.4 BILLION

NET EARNINGS = $1.2 BILLION

2012 Q2 Results:

REVENUES = $3.3 BILLION

NET EARNINGS = $750 MILLION

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Here we can see that even though revenues are about the same, net earnings have fallen 35% compared to the same time last year.  So… I am proven wrong. 

The gold miners profit margins are getting hammered even though the price they are getting for gold is higher than it was in the same period last year.

PASCUA LAMA…. A THORN IN THE SIDE OF BARRICK???

I believe Barrick has huge problems with its Pascua Lama mine that is located in the Ande Mountains in a glacier field.  Here is their update on the mine:

Due to lower than expected productivity and persistent inflationary and other cost pressures, as previously disclosed, the company initiated a detailed review of the cost and schedule estimates for Pascua-Lama in the second quarter. Preliminary results currently indicate an approximate 50-60 percent increase in capital costs from the top end of the previously announced estimate of $4.7-$5.0 billion, with first production expected in mid-2014. The company will provide a further progress update with third quarter results.

Again… we see that there is COST INCREASES as well as problems with getting work done on schedule.  Barrick was supposed to produce gold by the first quarter of 2013, now it has moved to the middle of 2014.

IS BARRICK HIDING THE FACT THAT THEY REALLY HAVE BIG PROBLEMS??

Comments

  1. Phyzz only!

  2. Spot on brother 2 oz

  3. Look at the section “SUMMARIZED FINANCIAL RESULTS” for Goldcorp.

    http://goldcorp.com/Investor-Resources/News/News-Details/2012/Goldcorp-Reports-2012-Second-Quarter-Results1130323/default.aspx

    They produced 18,500 oz less of gold and also sold 74,7400 oz less of gold, but looks like they tried to make up for it with selling more of the by-products.  Across the board, average realized prices were down from previous year’s 3 months.  Also looks like last quarter they sold more than their production, this quarter they held back 46,000 oz of gold.

    Guessing they’re stockpiling production due to soft prices…?

  4. *correction above “74,740″, not “74,7400″ oz less of gold

  5. Guessing they’re stockpiling production due to soft prices…?

    OMG ………..IF True

     a miner with a ………..BRAIN

    nice job jj83

  6. I think my eyes are tired from staring at screen all day.  The by-products sold Q2FY2012 were also less than actual production in comparison to Q2FY2011.

    I guess this bein a silver focused site, for Q2FY2012 8,184,100 oz produced and 7,139,400 oz sold.  Leaving supposed 1,044,700 oz available.  Though for Q2FY2011, there was lower production, but it appears once again, like their gold, they oversold production (6,498,700oz prod, 6,755,100oz sold = 256,400oz deficit)

    Not full picture, would need to look at Q1′s data as well and the realized prices to see if there is some consistent drive to stockpile oz’s corresponding to lower prices.  (SRSrocco’s custom looking chart has certain specific info and is focused on gold)

  7. GJ SD

    Bloomberg picking up on ABX’s problem:

    “Barrick Says Cost of Pascua-Lama May Jump to $8 Billion”

    http://www.bloomberg.com/news/2012-07-26/barrick-gold-quarterly-earnings-miss-estimates-as-output-falls.html

    Barrick Gold Corp. (ABX), the world’s biggest producer of the metal, said the estimated cost of building a mine in the Andes may jump to about $8 billion because the project is more complex than it had anticipated.

    Pascua-Lama, located at an elevation of 3,800 to 5,200 meters (12,468 to 17,061 feet) on the border between Chile and Argentina, will cost about 50 percent to 60 percent more than top end of a previously estimated range of $4.7 billion to $5 billion, Toronto-based Barrick said today in a statement. Initial output is now expected in mid-2014 instead of mid-2013.”

  8. “Barrick Says Cost of Pascua-Lama May Jump to $8 Billion”

     

    In other words at the current spot prices for gold & silver  it is not worth doing

    Thank you JPM

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