Gold and Silver Miners Earnings Reports Hit Full Stride

The miners are hanging in there so far, but here’s what to look for

The mining sector earnings reports hit full stride this week, and we already have some earnings hitting the tape.

Barrick Gold beat earnings expectations when they reported 2nd Quarter 2017 earnings last week. Some highlights from their report:

  • Barrick reported second quarter net earnings attributable to equity holders (“net earnings”) of $1.084 billion ($0.93 per share), and adjusted net earnings(1) of $261 million ($0.22 per share).
  • The Company reported second quarter revenues of $2.160 billion, net cash provided by operating activities (“operating cash flow”) of $448 million, and free cash flow(2) of $43 million.
  • Gold production in the second quarter was 1.432 million ounces, at a cost of sales applicable to gold(3) of $726 per ounce, and all-in sustaining costs(4) of $710 per ounce.
  • Total debt was reduced by $309 million in the second quarter.
  • We continue to expect full-year gold production of 5.3-5.6 million ounces, at a cost of sales(3) of $780-$820 per ounce, and all-in sustaining costs(4) of $720-$770 per ounce.
  • Normal leaching operations, including the addition of cyanide, have resumed at the Veladero mine in Argentina, following the anticipated ramp up and testing of upgraded leach pad systems.
  • We completed the formation of our strategic partnership with Shandong Gold, a landmark agreement with the potential to create fundamental long-term value for our respective owners, as well as our community and government partners in Argentina.
  • Barrick will begin discussions with the Government of Tanzania next week concerning the concentrate export ban and other issues impacting Acacia Mining plc’s operations in the country

As shown in the Barrick Earnings Report, the miners have been working to lower their all-in sustaining costs, even in the face of oil prices that are higher than they were last year. It appears the miners are also looking to lower their debt burdens as the next gold bull market run gets off to is slow but sure start.

The HUI has been performing nicely over the last week, as shown in the chart below:

Beginning on 8/3, several of the junior miners release their earnings reports, including First Majestic, Hecla Mining, and Endeavour Silver. The following week, we will see how earnings are reported for companies such as Pan American Silver, Tahoe Resources and Silver Standard Resources.

Last week and continuing through this week have seen nice moves in both gold and silver, and both metals are above their 50-day moving averages.

Continued dollar weakness, rising oil prices, and now the lean-and-mean miners who have adapted and survived the heavy-handedness of downward price manipulation could be about to signal solid earnings that confirm the new bull market so many are reluctant to accept.

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