Canadian gold miners will double down on initiatives to show they can deliver bottom-line growth regardless of the price of gold.
Gold stocks got a boost Thursday as Barrick Gold Corp., Goldcorp Inc., Agnico Eagle Mines and Kinross Gold discussed exploration and development plans that were more ambitious than in recent years amid languishing gold prices. The companies also maintained their commitment to bring costs down and cut debt.
Bullion prices rose steadily last year until the November election of U.S. President Donald Trump, when they dropped and closed the year below US$1,200 an ounce.
But the post-election buzz around his economic plans seem to be fading and gold prices have been rebounding recently, toward its August 2016 recent high or US$1,340. Given the persistent level of global uncertainty, observers are mixed in their outlooks for the yellow metal this year. Still, many are optimistic on gold’s long-term fundamentals.
After years of focus on organic growth, Barrick Gold Corp. said Thursday it plans to increase exploration outside of its existing projects, to both nearby and greenfield opportunities.
“It’s something that we’ll look at with a higher degree of intensity though at the same time we’re going to continue to be very disciplined. We don’t need to make an acquisition,” president Kelvin Dushnisky said in an interview.
“We’re very optimistic, we think that the heavy lifting over the past couple of years has really positioned us to take the company and advance it.”
It will focus on “external opportunities” through acquisitions, joint ventures and partnerships and ramping up development at several key projects including Goldrush and Cortez, though much of the effect on production levels won’t be seen until after 2020.
The company boosted its 2017 gold production estimate to between 5.6 million and 5.9 million ounces with all in sustaining costs coming in between US$750 and US$790 per ounce, representing an improvement from its earlier guidance.
It’s also launching an aggressive debt reduction scheme to cut its total debt by US$2.9 billion to US$5 billion by the end of 2018 —half of which is targeted for 2017. Shares in the company jumped nearly five per cent to $26.52 in afternoon trading on the Toronto Stock Exchange.
Vancouver-based Goldcorp Inc., the world’s third-largest gold miner, has laid out an ambitious growth plan to increase production and reserves by 20 per cent. The company also said it would trim all-in-sustaining-costs by 20 per cent to US$700 an ounce over the next five years. The 20 per cent increase in reserve growth comes from existing operations, but the company is also eyeing opportunities to partner with peers on joint ventures.
CEO David Garofalo pointed out that Goldcorp is a standout in the industry as production at most of its peers is projected to decline in that same time frame.
“The industry has to reverse the downward trajectory in reserves and it can’t fall on any one company’s shoulders to change that dynamic,” he said in an interview.
“We have to make the industry relevant to generalist investors again and a shrinking industry is not going to be very attractive so we’re talking very actively about collaborating with our peers.”
Goldcorp stock jumped 6.3 per cent to $23.21 on the Toronto Stock Exchange on the positive outlook and improved earnings.
It reported a higher-than-expected fourth-quarter profit of US$101 million, or 12 cents per share, rebounding from a loss of $4.3 billion, or $5.14 per share in the year-earlier, largely thanks to much lower costs at its gold mines across the Americas of around US$747 per ounce compared to US$977 per ounce in the same quarter of 2015.
It projected it would produce 2.5 million ounces of gold in 2017 at an all-in-sustaining-cost of around US$850 an ounce.
At Agnico Eagle, the focus was on development at its new recently-approved Nunavut mines, where it plans to ramp up spending to meet its goal of producing two million ounces by 2020, one of its targets in the goal of diversifying away from sole reliance on the LaRonde mine, its flagship mine in northern Quebec.
The company maintained its earlier production guidance for 2017-2018 at 1.5 million ounces, while production in 2019 is expected to be slightly higher at 1.6 million after adding recently-approved $1.2 billion Nunavut projects to its outlook.
The company raised its capital spending plans into 2019, largely due to construction at the Amaruq and Meliadine mines in that northern territory, committing US$900 million between now and 2019 at Meliadine and US$330 million at Amaruq.
“Our reserves are growing and that’s due to a commitment to exploration, not only at our existing mines where we’re seeing those deposits grow but also in the project pipeline, we’re seeing deposits grow that will form future important parts of our mine plan,” CEO Sean Boyd said on a conference call.
Still, its share price fell about four per cent to $61.89 on the TSX after its fourth-quarter adjusted earnings of US$4.5 million, or two cents per share fell short of analyst expectations of eight cents per share —largely due to a weather-related delay in gold shipments, which were sold in January at a higher gold price. However, like its bigger peers, Agnico Eagle’s bottom line was helped by lower unit cash costs.
Kinross Gold also reported earnings Wednesday that pared both its fourth-quarter and full year losses. In the fourth quarter it lost $116.5 million compared to $841.9 million in the year earlier. Its full year loss was $104 million compared to $984.5 million in 2015.
For the full year, it reported record gold production of 2.8 million ounces. Like its peers it also improved its cash flow, by 32 per cent over the previous year.
For 2017 it expects to produce between 2.5 and 2.7 million ounces of gold at an all-in-sustaining-cost of between $925 and $1,025 per ounce. It is boosting capital spending by five per cent to $900 million and will focus on development projects at its Tasiast and Bald Mountain properties.