With all the recent uncertainty and high volatility, gold is shining quite brightly in the last few quarters. And, in theory, this should benefit the various miners of the precious metal. But looking at recent results from a low-cost leader Goldcorp (Ticker NYSE:gg) shows that higher gold prices do not have the same improving results, shares how he was able to report a big miss.
Overall, goldcorp has been a hit on several fronts, even with moderate gold prices higher during the quarter. Now the question for investors is whether or not skip and the result of a fall in stock prices is a brilliant opportunity for stock GG or if it’s time to take a pass on one-the leader of the sector.
The decline of production in goldcorp
Was that supposed to be a miner for a year. After what seems like forever, gold prices finally started to move in a positive direction for the major gold stocks like Goldcorp. The volatility of returns and the rally in the market is getting a bit long in the tooth, gold once again began to glow and rose to critical 1,300 per ounce dollars.
Gold reserves, for example, GG, it should have been a godsend. After several years of making ends meet on low gold prices, major gold stocks such as goldcorp and Barrick (Ticker NYSE:ABX) has cut costs, closed unprofitable mines and drive all costs lower. With rising prices, the spread between prices and the cost only increased. So, for gg and his sister, more sustainable gold prices should instantly raise the bottom line.
Unfortunately, this is not the case for Goldcorp.
The miner reported earnings per share of just 8 cents. This was below forecasts of 20 cents a share lower than it earned last year in the first quarter. Keep in mind, the price of gold was higher in the first quarter of this year compared to the same period last year. Goldcorp should be swimming in profits — and it was waiting.
So, what gives?
Well, it was exactly what don’t want to see what happens to miners in a rising commodity-price environment. Produced less at higher prices. For the quarter, he only managed to stamp 590K OZ. the cost of gold production. It’s about 65,000 ounces lower than in the first quarter of 2017. In addition, the PC all total the cost of maintaining production (IACS) was about $ 10 per ounce when you look at two quarters. This is a big problem, because HS is not able to benefit from the rising prices of gold and she earned less per ounce that it made my. It is exactly the opposite of what you want to see from mining of the Fund or any commodity composition, for that matter.
Long-term problem for the stock HS?
The question is whether or not it’s just a short burst for gold reserves. For many years, Goldcorp has been known as the producer with the lowest cost resource-rich mines. This is not necessarily the case with gold implosion and the recent return. Smaller rivals as stock agnico Eagle Mines Ltd (Ticker NYSE:AEM) stole a lot of gg’s thunder — not to mention investor dollars. Shares of goldcorp finished about 6% in 2017.
That is why Goldcorp announced a massive strategic plan at the end of 2016 to boost its value and boost returns. The company’s goal is to achieve 20% increase in gold production and total reserves. At the same time, he wants to reduce their Mako by about 20%. The idea is to make the share price closer to its book value estimates that morningstar is about $ 27 per share.
Under this 20/20/20 framework, the last quarter of the years is not exactly promising. The quarter seemed like a re-hash of the problems of the company with a Golden bust back in 2012ish. Even worse was the fact that gold prices were higher.
There is some hope on the horizon. Management expects a sustainable annual savings of about $ 250 million by mid-2018. Reportedly, these efforts are on the way. At the same time, three large projects of the company in Peñasquito pyrite Leach, processing Musselwhite materials and Borden mine — all on the way to mass production by the end of 2019. These projects should contribute to the production of gg, and I hope it gains as gold prices increase.
Cautious optimism in goldcorp
For Goldcorp, in the last quarter was more of the same. The miner continues to fight for what seems years, as gold prices have stalled. Prices are rising and the firm is still not thriving, it makes it harder to get super excited for holding securities.
Yes, it is profitable. And Yes, he has a plan to stimulate growth. But we have a year to plan and we have already seen the company take a step back. That doesn’t make me want to put my hard-earned cash to ownership in a mining — especially when others begin to see real results.
In the end, the stock HS can be to hold. This is a rather cheap and pay very little dividends marker. I hope he can get his act together for the next quarter. Until then, new investors can take a polite pass and make a bid for another miner.
At the time of this writing, Aaron Levitt not to take a position in any of the above securities.